An unincorporated association is the simplest business model that a non-profit organisation can employ. At its most basic, the structure is nothing more than a group of individuals who have voluntarily come together for the purpose of achieving a common intention or goal without a view to making a profit. The majority of non-profit organisations within Australia utilise an unincorporated association business structure. Whether this business model is right for your venture will depend upon a myriad of considerations that are unique to each case.
There are no formal requirements for the formation of an unincorporated association. It is formed upon the basis of a mutual understanding amongst the members, although a constitution is often adopted to set out the purpose and intentions of the organisation.
In circumstances where an unincorporated association adopts a constitution, it is presumed that the members do not intent to be contractually bound by the document. Binding contractual relations will only be said to exist where the document expressly purpose to impose such relations upon the members.
Capacity to contract
An unincorporated association is not recognised as having a distinct legal entity separate from its members. As such, it does not have the capacity to enter into contract in its own name. Any contract made on behalf of an unincorporated association has to be entered into with the:
- members of the association;
- an agent of the association; or
- a trustee of the association acting with the members authority.
Liability of members
General members of an unincorporated association are usually not liable for contracts entered into on their behalf by the association. General members have a right to be indemnified from the funds of the association if they incur personal liability.
Committee members of an unincorporated association on the other hand can be help personally liable for contracts entered into on behalf of the association.
Member disputes and court intervention
The courts have generally refused to intervene in internal disputes between the members of an unincorporated association, unless it can be established that the members proprietary rights have been affected or there is some other contractual relationship between the members and the association.
If the rules of an unincorporated association set out the procedure to be adopted when dissolving the entity then these rules are to be followed. In circumstances where there are no rules, an association can be dissolved if all the members unanimously agree to this course of action.
Upon the dissolution of an unincorporated association, the body’s assets are to be realised, all debts are to be paid and any surplus is to be distributed amongst the members or in accordance with any contractual undertakings.
Would you like to know more about unincorporated associations or other business structures available to you? Our team of experienced LegalVision lawyers would be happy to assist you with any queries that you may have. Contact us today to see how we can help.