Unincorporated Associations without Charitable Status

An unincorporated association is a simple democratic structure consisting of a collection of individuals who have come together with a shared aim or purpose, usually found in a written constitution. A committee is usually elected to run the organisation on behalf of the members. One key element that makes unincorporated associations different from other legal structures, such as companies, is that, in Scotland, they do not have limited liability.

This means they are not recognised as entities separate from the members – i.e. it does not have a legal personality. This therefore places all liability onto the members as individuals.

For example, it is possible that, under the current law, a member of an unincorporated association could, by virtue of that membership alone, find themselves personally liable in a delict to a third party injured at an event organised by the association.

This lack of legal personality also means that unincorporated associations cannot carry out acts such as entering into contracts, owning property or engaging employees.

Advantages to being an Unincorporated Association

Can be set up quickly and cheaply
Cheap and relatively easy to run
Offers a democratic structure with reasonably flexible procedures
No formal registration requirements
No detailed statutory procedures to be followed in relation to members’ meetings, etc
No requirement to notify any public register of the people serving on the management committee
No annual return to file with any public register
Can be a less intimidating structure for those considering whether to join as members or stand for election to the management committee
Nothing is set in stone – the option to switch to an incorporated structure in the future will remain open to you.

Disadvantages of being an Unincorporated Association

Does not have a separate legal personality so ownership of assets lies with individuals acting on its behalf, usually the management committee, or the general membership.
Leases/formal contracts have to be entered into in names of office bearers. This can cause technical difficulties where there are changes in the people holding these offices
Legal proceedings cannot be taken by the organisation but only by individuals representing it. similarly, legal proceedings would be taken out against individual members rather than the organisation
Management committee or members could be personally liable for debts if the organisation were unable to meet its debts and liabilities out of its own resources
Because it is more of an informal structure, it may be seen as “less professional” in the eyes of potential funders.

Most suitable for

An Unincorporated Association is most suitable for small groups with limited or specific purpose(s) that operate on a small budget, do not own property, employ staff or enter into lease agreements or contracts.

Unincorporated Charitable Trust

An Unincorporated Charitable Trust is a simple structure consisting of a collection of individuals who have come together with shared charitable aims or purposes – commonly relating to the protection and management of money or property (that is specific assets).

This structure is not a democratic one. The Trustees are usually the only members and decision making rests entirely with them. Trustees choose other Trustees - effectively making it a ‘closed shop’. Once they are appointed, the Trustees of a Charitable Trust usually have an unlimited term of office ; - they do not have to stand for re-election and can basically hold their offices until they resign (or die).

By its very nature a Charitable Trust only exists as a charity registered with the Office of the Scottish Charity Regulator (OSCR). It will therefore need to pass the two-part Charity Test demonstrating that its purposes are charitable and that its activities/services provide community benefit. The running of the Charitable Trust will be regulated by OSCR with reference to The Charities and Trustee Investment (Scotland) Act 2005.

Advantages to being a Charitable Trust

relatively cheap to set up - although you may incur legal fees for drawing up the Trust’s constitution (called a Trust Deed or Declaration of Trust)
relatively cheap to run
shares the advantages of being a registered charity

Disadvantages of being a Charitable Trust

not a democratic structure - this may make it difficult to access some funding streams
cannot sign legal contracts in name of group – this means that any lease documents, rental agreements, hire contracts, funding contracts etc will need to be in the name of one (or more) of the individual Trustees.
trustees face unlimited personal liability for losses resulting from actions in breach of the Trust.
if the Trust is small - statutory reporting duties and Trustee responsibilities relating to charitable status may outweigh advantages
can be inflexible and not necessarily future-proof - once a Trust has been set up the legal structure can be difficult to change.

Most suitable for:

An Unincorporated Trust may be the best option if your group: