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Associational Status Information
Associational status
An unincorporated association is an organisation that arises when two or more
people come together for a particular purpose but decide not to use a formal
structure like a company.
Most clubs, societies, associations, groups, and some syndicates are unincorporated,
as are a considerable number of voluntary organisations.
Advantages
Unincorporated associations enjoy greater freedom of operation than a company or
a partnership. For example,
 No requirement to submit annual returns.
 No regulatory frameworks (unless also a charity)
 Completely private operation answering only to those who are members
Disadvantages
Unlike an incorporated association (for example, a limited company) an
unincorporated association is not a “person” in law. So it has no legal rights and is
not separate from its members.
It follows that individual members are legally responsible for the acts and omissions
of the entire association.
Unincorporated associations may also have trading or business objectives or carry on
commercial activities, but these are treated by HMRC as if they are operating a
partnership i.e. the ‘members’ are jointly and severally liable, and all income will be
taxable.
Limitations
Because it has no legal identity of its own and in legal terms is only a collection of
individuals, an unincorporated association cannot:
 Start a legal action
 Borrow money
 Enter into contracts in its own name
 Hold property
An association can set up a trust to legally hold ownership of any property and assets
for the members who are the beneficiaries.
Personal risk
Because unincorporated associations have no separate legal identity, members have
to sign loan documents and contracts as individuals and carry the risk personally.
This way of working is unlikely to offer a long-term solution if you intend to expand
the activity, for example:
 Taking on employees
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Raising finance or applying for loans
Issuing shares (usually debentures rather than shares)
Entering into large contracts
Taking on a lease or buying a freehold property
Structure
Because the organisation has no legal entity its structure can be written to entirely
reflect the activity of the individuals who wish to be members. The only limitations
will be to ensure the structure meets the potential funders’ requirements in terms of
the purpose, the beneficiaries and the assets (usually around the dissolution clause)
and the Charity Commission eligibility requirements, if applicable.
Process
As an unincorporated association there are no legal formation requirements. Once
the group has decided on the words of the Constitution it only requires a Minuted
Meeting to adopt the Constitution and the Association is deemed to be formed.
All further details of governance activity takes place within the Minuted Meetings
and do not need to be shared or opened to any enquirer other than the recognised
members.
For ‘Best Practice’ purposes it is usual to have 3 or more Founder Members of the
Association.
Sally Kelly
The Guild Social Economy Services CIC
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