The Dangers of Belonging to an Unincorporated Association

1. Simplicity and Low Cost

Unincorporated associations are straightforward to establish. They can be formed through an agreement among members, often outlined in a written constitution. There is no requirement for formal registration with Companies House or the Charity Commission, making the setup process quick and cost-effective.

2. Operational Flexibility 

The absence of formal corporate governance rules gives members considerable freedom to shape their operations, as they can tailor rules and procedures to suit their specific needs.  This flexibility is particularly beneficial to small, informal organisations that need to adapt quickly and work collaboratively.  

3. Greater Privacy

Unlike incorporated entities,  unincorporated associations are not required to file annual accounts or disclose financial information publicly.  This level of privacy can be advantageous for groups that prefer to keep their internal affairs confidential.   

1. Lack of Legal Identity

An unincorporated association does not have a separate legal identity from its members.  As a result, it cannot own property, enter into contracts or initiate legal proceedings in its own name.  These actions must be carried out by individuals on behalf of the association, which can lead to complications in asset management and succession planning. 

2. Unlimited Personal Liability for Members

Perhaps the most significant drawback is that members, particularly committee officers such as the chair or treasurer, can be held personally liable for debts, contractual obligations or legal issues incurred by the association. 

Even ordinary members may be at risk if they are deemed to have authorised actions by committee members or officers. It could be argued that the members of an association implicitly give its officers authority to enter into contracts on their behalf because they have accepted the association’s rules. Bearing this in mind, it is important that association rules set out very clearly what power the chair, treasurer and other officers have to bind the members.​

3. Funding Limitations

Some funding bodies and grant providers may not support unincorporated associations due to their informal structure and lack of legal status. ​

Unlimited liability poses a significant risk to the personal assets of officers and members. Where an association incurs a significant liability, for example, when a person is seriously injured on its premises, the portion attributable to each member could be substantial. Insurance policies may protect against such liabilities, but voluntary groups are less likely to have the procedures in place to ensure that they abide by the conditions of insurance. Insurers may therefore fail to pay up in some cases.

As the scope and scale of an organisation’s activities increase, the limitations of an unincorporated model can become a real hindrance. Groups involved in significant financial transactions, property ownership or management or long-term projects should strongly consider converting to an incorporated structure, such as a company limited by guarantee or a community interest company, to obtain legal status and protect individual members from personal liability.