Saturday 12 May 2012

Voluntary associations: time to reform the club?

The news at the end of last week was full of reaction to the legislative programme announced in the Queen’s Speech. Most commentators seemed underwhelmed. We’re still trying to work out how many mixed metaphors are contained in Polly Toynbee’s “This limp array of damp bills has been drained of any potential life” (which put us in mind of nothing so much as Roy's wonderful “damp squid” ). However, on Thursday, Michael Moore told the House of Commons that, in addition to the proposed bills outlined, the UK coalition “will seek to support the Scottish Law Commission in bringing forward measures to reform the law in relation to Scottish Partnerships and Unincorporated Associations”. Scarcely the kind of thing to get the heart racing, no doubt. And yet, it is by the work of the unincorporated association that much of the stuff of everyday civic life is delivered and the proposals should be of interest to anyone who has any dealings with a broad range of bodies from sports associations and childcare groups to branches of political parties, charities and religious organizations.

These bodies are created simply by their members’ agreement to come together to carry out a mutual purpose. There will usually be some set of rules and formal constitution and a committee or set of office-holders to run things. The interesting point, not just for lawyers but for any member of such a grouping, is that an unincorporated association has no distinct legal personality, separate from its members or office bearers, unlike a limited company or (in Scots law at least) a partnership. 

And this has real, practical consequences. The club can make agreements only if individual officer holders, and sometimes even individual members, enter into contracts involving personal liability. There is uncertainty about whether the liability a club might have for wrongful acts committed by members extends beyond the its assets and into those of members or officials. As a club cannot own property in its own right, title must be taken in the name of the members or some or all of the officials, to be held by them in trust on its behalf as trustees for the members of the association.

There is no single codifying statute setting out the law regulating clubs and voluntary associations. The Scottish Law Commission views this as unsatisfactory  and points out that members of associations are often oblivious to the fact that they are at serious financial risk: "[i]t is perhaps not readily apparent to members that by managing or even simply joining a voluntary group or club, they may be exposing themselves to personal financial risk."
The response to the SLC’s consultation in 2008 was clearly supportive of change and in 2009 the Commission made its proposals. In summary, Scottish-based, not-for-profit associations having at least two members and having a formal constitution in appropriate terms should automatically, without any need to register and subject to an opt-out, be accorded separate legal personality and ascribed the status of “SALP” (Scottish Association with Legal Personality). The association should disclose its name and an official address on all communications and would have to be make publicly available on application certain documents and information about its operation. It could then, for example, be sued by someone injured as a result of harm caused by the negligence of a member. Neither officials nor members of a SALP would incur any personal liability simply by acting as an office bearer or member and would in essence have limited liability unless “culpable”.
This scheme, which mirrors much of the NCCUSL’s Uniform Unincorporated Nonprofit Association Act 2008, in force in many US states, formed the basis of a draft bill published in 2009. The UK government is now embarking on its own consultation . It does not want to discourage incorporation and is considering limiting the SALP option so that it is available to smaller organizations only. Consideration is being given to disclosure requirements and it is suggested, perhaps on the face of it rather oddly, that sanctions might be applied against a body that wrongly describes itself as a SALP.

In any event, the consultation documents are an interesting read and the deadline for submissions is 2 July 2012. 

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