An unincorporated association is an aggregate of all of its members at a particular time. Effectively each member is jointly and severally liable for decisions of the body and each member has unlimited liability for the debts of the body.
There is no specific legislation in Australia which applies to the regulation of unincorporated associations or the rights and obligations of its members. The lack of an independent legal status causes uncertainty in areas such as property ownership, contract, liability, members rights inter-se, and as against others. Significant issues include:
a. who is considered to be the ‘members’ of the body;
b. the risk of personal liability for members, committee members and volunteers;
c. there may be no automatic right to be indemnified out of the association’s property for any loss the liable member, committee member or volunteer may suffer.
The relationship between the members of an unincorporated association is governed by the common law. An unincorporated association can improve clarity around some of these issues by having a governance document (for e.g called a constitution or terms of reference) to which relevant ‘member’ stakeholders agree to be bound and which would be binding under contract law. This document could include good corporate governance elements setting out the authority, stewardship, leadership, control and decision-making powers.
A group of people who intend to work together for a specific purpose on more than one occasion ought obtain legal advice about appropriate legal and tax structuring. Incorporation of an association under State legislation or under Commonwealth legislation provides advantages including limited liability.
For more information please contact Lesleigh 0488056066