What are unincorporated associations? Every resident’s association is one, so are most sports organisations, religious orders, non-governmental organisations, even political parties. Few people know what an unincorporated association is, or what risks being a member of one pose.
In the eyes of the law, unincorporated associations do not have an independent legal personality. They are “just the collection of members”, says the president of the Law Reform Commission, former chief justice Frank Clarke.
Many organisations in the State do incorporate by setting up what are called companies limited by guarantee, which do not have a share capital, but they do serve to protect the members’ personal assets if the company is successfully sued. However, many small associations, as well as many larger groups such as religious orders and political parties, choose not to incorporate for a variety of reasons, including a desire not to be diverted from their core purpose.
However, this brings risks, such as, if someone wants to sue an unincorporated club, then in law that person takes the case against the club membership rather than the club. In theory, each member is jointly and severally liable for club debts. Normally insurance exists to cover issues like clubhouse injuries.
Frank Clarke, President of the Law Reform Commission, explained, the legal consequences for clubs, religious groups, NGOs and political parties that organise as unincorporated associations, “The law does not regard an unincorporated association as being a different thing from just the collection of the members. An unincorporated association is one set up through an agreement between a group of people who come together for a reason other than to make a profit. The risks of not incorporating include members being jointly and severally liable for club debts, and members who suffer injury not being able to take a case against the association because, in the eyes of the law, that is viewed as trying to sue yourself. Unincorporated associations cannot hold property and cannot be party to a contract.
President Clarke said that it is important to balance clarity for members against overregulation, “While people should know where they stand, they should not be discouraged from doing good and useful things. The Law Reform Commission has already ruled out recommending mandatory incorporation for associations that enter contracts, hold property, have employees, or have volunteers who carry out work similar to employees. This could interfere with the freedom of such bodies to associate to pursue collective goals and to participate in public life.”
The Law Reform Commission is planning to draft a report for early next year which will provide recommendations for changes to the Oireachtas. A consultation process currently under way has been extended to May 15th, such is the level of interest. Mr Justice Clarke says the Commission is very anxious not to interfere unnecessarily in the work of clubs and associations that do so much good work and contribute so much to civil society.
“We are trying to balance three things,” he says. “One is that there is clarity, so people know where they stand. Secondly is to deal with that sort of situation (club members finding themselves having to pay a €2 million damages bill), before it happens if you want. And thirdly, to be mindful that overregulation might discourage people from doing things that are very good and very useful.”
The consultation process is important, he says, because it allows people involved in sporting, religious and other organisations to consider how any potential changes set out in the consultation paper prepared by the commission might affect them. The commission wants such people to make their concerns known to it.
“I think our biggest concern is to ensure that we don’t do something that has consequences that make things more complicated and worse,” says Mr Justice Clarke. “Sometimes measures that are designed to make things easier don’t in the end make them easier, and it is very much an area where the devil is in the detail.”
Once the Commission report is published, it will be up to the Oireachtas to decide what changes, if any, should be introduced, including changes that could make it easier for people to sue such unincorporated associations.
A copy of the consultation paper is available on the website of the Law Reform Commission. https://www.lawreform.ie/news/deadline-for-submissions-on-the-commissions-consultation-paper-on-unincorporated-associations-extended-to-15-may-2023.1112.html
NB – This is a guide for information purposes only and does not constitute legal advice. If you have an issue requiring legal advice, please contact any of the team at Nolan Farrell & Goff LLP, whose numbers can be found on our website www.nfg.ie, or email firstname.lastname@example.org.