Unincorporated groups

Do we need a statement of objectives and rules?

While not required by law, it is recommended that unincorporated associations write a statement of objectives to describe their main purpose (eg, to promote public awareness of a particular endangered species) and to have at least some basic rules about how the group conducts its activities. This is particularly important when a group intends to deal with assets or money at any stage. The benefit of having rules and objectives is that it provides the group with a clear, identifiable direction and purpose. It also helps to avoid misunderstandings amongst members in the future.

There are no formal requirements for producing a statement of objectives or rules for an unincorporated group, however once agreed upon they should be written down and a copy given to each member (and new members that join). A ‘master’ copy (updated if any changes are made) should be retained by a core member of the group. Ideally, rules should cover issues such as:

• the purposes of the group (sometimes called the ‘mission’);
• the membership of the group, including eligibility and method for removing members;
• conduct of meetings including frequency, voting procedures and quorum numbers;
• delegation of powers amongst members;
• dispute resolution procedures amongst members;
• procedures for amending the rules in the future; and
• procedures for ending the group including the distribution of any remaining assets.

Unincorporated groups should note that rules regarding their governance are unlikely to be legally enforceable unless there is evidence of a clear intention that the group intended to create a legal relationship between its members, or where it is in the public interest to have those rules enforced.

To remove any doubt, the rules should state whether or not they are intended to be legally enforceable and this should be specifically agreed upon by members. Record this agreement in a note (minutes) of the meeting at which it was discussed - this would be evidence to help avoid doubt at a later stage.

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Do we need to register the name of our group?

You are not required to register the name of your unincorporated association. However, an unincorporated group should register its business name where it 'carries on business' under that name. From 28 May 2012, this registration is through the Australian Securities and Investments Commission, rather than Consumer Affairs Victoria.

Groups should be aware that registration of a name will not grant ownership of that name, but it does provide some protection against the name subsequently being used by others.   Registration of a business name prevents that same name from being registered by another organisation at a later date.

Because an unincorporated group has no separate legal status, registration of a business name must be undertaken by a member of the group's committee who will then hold the business name on behalf of the organisation.

For details on how to register a group's business name, click here.

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How long should we remain unincorporated?

A common reason given for remaining unincorporated is the freedom to conduct affairs without having to comply with government (statutory) requirements, including reporting requirements.  This will generally suit informal groups that are more social in nature (eg, a book group that meets regularly in members’ houses).

Often, members of an unincorporated group will feel as though incorporation is not necessary as the group intends to remain informal and focus only on a discreet issue or cause. Further, a group may wish to avoid the administrative steps associated with incorporation, such as fees and paperwork, which may seem a low priority if the group has urgent matters to attend to.

An unincorporated structure allows a flexible arrangement between members which may be desirable for many organisations, depending on the:

• any risks associated with the group’s activities,
• commitment the members have to the group’s purpose,
• scale and size of the group’s activities, and
• intended timeframe of the association.

An unincorporated group is able to be arranged in any way it feels appropriate and is generally not restricted in how it conducts its meetings and activities (subject to general legal requirements such as food handling regulations etc). This may be ideal for small groups with low risk activities (like a book group). Possibly also for groups that are focussing on short-term issues which require urgent attention (but which again are low-risk), or those groups not wishing to have any information (for example, their annual revenue) disclosed on a publicly available register.

Most groups start out as being unincorporated. However as an informal group evolves to a more structured association or as it grows in size, takes on new activities and / or paid staff, it is recommended that members revisit the question of whether to incorporate (for more information see our page in 'The incorporation decision').

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What are the dangers of remaining unincorporated?

Should your group choose to remain unincorporated, it is important that you each understand that the group will not have its own legal status.  This creates a number of potential issues that you should be aware of.

Without a separate legal ‘identity’ for the group as distinct from the individuals who make up the group, an unincorporated association is unable to be sued as a separate body should it incur liability or debt. Instead, it will be the individuals within the group that could potentially bear the responsibility for the group’s debts arising from its actions. It is therefore important that a group which chooses not to incorporate is made fully aware of the risk of personal liability, especially for its committee members or office bearers.

Groups should also consider the other practical difficulties that arise by remaining unincorporated, which include:

• an inability to enter into contracts or agreements under the group’s name (including applications for tax concessions);
• an inability to own/lease property in the group’s name;
• an inability to sue or bring a legal action in the group’s name; and
• difficulties in receiving benefits or gifts bestowed upon the group as a whole (including difficulties with fundraising).

While it is not possible for an unincorporated association to receive goods in the group’s name, an individual member can receive a gift on trust for the unincorporated association. When this occurs, that individual must act as trustee and use those goods for the benefit of the association (that is, must use it to advance the purposes of the group).

A group should think about how much financial risk it may be exposing itself to through its actions, and should be aware of the potential for individuals to bear the personal legal responsibility of any liabilities that arise. Incorporation should be viewed as an opportunity to limit personal risk, and unincorporated groups should therefore consider whether they are putting their members in a position where they may become personally liable for the actions of the group.

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Resources

Consumer Affairs Victoria (CAV) resources - incorporating regulator

Australian Charities and Not-for-Profit Commission - Charitable regulator

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