Unincorporated associations and ACNC registration

An unincorporated association is one type of organisational structure for a charity.

Unlike an incorporated structure, an unincorporated association is not a separate legal entity from its members.

It is simply the group itself, of people who has agreed to come together to pursue a common purpose, such as to establish a faith community.

Therefore, an unincorporated association cannot enter into contracts in its own name, or own land, or employ people, or sue or be sued.

The members of the unincorporated association do these things on behalf of the association. The members may each have individual legal liability for the association’s debts and defaults, something which can lead to legal risk for those members.

Who chooses to be an unincorporated association?

The unincorporated association structure is generally suitable for small, simple groups or organisations with minimal assets who do work that has minimal risk, and who are not intending to incorporate.

Groups who have recently formed and are small - such as early start-ups - may choose to be an unincorporated association.

While they may take any structure, groups like religious communities, animal welfare groups and cultural groups sometimes also choose to be structured as an unincorporated association. These types of associations can only be registered as charities if they have a charitable purpose and meet other requirements of registration.

One benefit to structuring your organisation as an unincorporated association comes through their ease and cost-effectiveness to establish. Another is their flexibility.

However there are challenges which come with the unincorporated association structure.

Personal liability

If the organisation is not able to pay its debts, the members of an unincorporated association can be required to make up the difference from their personal assets.

Therefore the structure may not be appropriate for an organisation that does risky work or that manages high value assets.

Often the governing rules of an unincorporated association contain a clause ’indemnifying’ committee member for personal losses (unless they’ve been fraudulent or haven’t been acting fairly).

Contracts and assets

• The association cannot enter into contracts in its own name (including to employ people) because the organisation is not a separate legal structure.
• The association cannot hold assets in its own name, again because it is not a separate legal structure.

Unincorporated associations sometimes deal with this by organising for a few people to hold assets ‘on trust’ for the association or its charitable purposes. A trust involves one party (the trustee(s) – an individual or group of people) holding assets for the benefit of others (in this case, the association’s charitable purposes). Trustees have very specific duties and obligations when managing trust property.

While these clauses and mechanisms can help manage risk, they may not always protect the members of an unincorporated association, which is why getting legal advice on these aspects is important.

Potential breaches of ACNC obligations

Unincorporated associations can also be at a higher risk of non-compliance with ACNC obligations. These can occur due to a number of reasons, many of which are linked with the association is governed. Some of the risks for unincorporated associations (and other types of charities) are that they may:

• have or wish to appoint Responsible Persons (committee members) who don’t understand their responsibilities
• appoint Responsible Persons who are disqualified (such as through bankruptcy)
• do insufficient research to find Responsible Persons and then fail to be clear about the responsibilities of the role
• fail to keep the ACNC Register updated with correct contact information
• only have (in reality) one person running the charity
• allow its Responsible Persons to mix charity and personal money together.

Ensure it meets ACNC and other legal requirements

The ACNC was established, in part, to promote and maintain public trust and confidence in charities.

The ACNC Act requires charities to meet several duties, such as remaining eligible for registration, being accountable by providing information in a timely way, and meeting Governance Standards.

Establish good governance in your association

Governance refers to the processes, activities and relationships of your charity that make sure it is effectively and properly run. It includes how decisions are made and communicated, the roles and responsibilities of people in the charity, including the management committee, and how it ensures that the charity’s mission, or purpose, is the focus.

The ACNC requires a minimum standard of governance, as set out in our Governance Standards. If your charity complies with the standards, this will help protect it.

Ensure your Responsible Persons are appropriate and aware of their duties

Governance Standard 4 requires charities to take reasonable steps to be satisfied that its responsible persons are not disqualified from managing a corporation or a charity.

Governance Standard 5 requires charities to take reasonable steps to make sure that the following duties apply to responsible persons and that they follow them. The duties can be summarised as follows:

• to act with reasonable care and diligence
• to act honestly and fairly in the best interests of the charity and for its charitable purposes
• not to misuse their position or information they gain as a responsible person
• to disclose conflicts of interest
• to ensure that the financial affairs of the charity are managed responsibly, and
• not to allow the charity to operate while it is insolvent.

Read more about the duties of Responsible Persons

Ensure your governing documents and policies include risk management measures

While, legally, an unincorporated association is not required to have written governing documents, many do because they are helpful practically and will greatly assist the association to demonstrate it complies with ACNC requirements.

It helps to have governing documents that clearly set out rules about how the association will be run, and cover issues such as decision-making, liability, management of resources and membership. The format these documents may take and what they will cover depends on the size of your association.

At a minimum, it is important to have financial controls and rules for managing issues such as conflicts of interest and how to handle complaints.

Unincorporated associations registered with the ACNC have ongoing obligations under the ACNC Act. These include to:

• maintain their eligibility to be registered
• notify us of changes to charity details when these change (such as responsible persons being appointed or leaving their role or charity contact details changing)
• keep records
• report to us each year, and
• comply with ACNC Governance Standards and external conduct standards, where applicable.

If your association has obligations to another government agency it must continue to meet them unless told otherwise by the ACNC or another government agency.