Background
First of all – some legal terminology.
We will try to keep this to a minimum, but this bit is really important.
It’s about the differences between being “incorporated” and “unincorporated”.
(There is an opportunity to give your feedback at the bottom of this page. )
Unincorporated legal structures
- An unincorporated organisation has no separate legal identity from the people who run it.
- This means that the people who run the organisation make agreements, employ people and sign contracts on behalf of the organisation. They are then responsible for its debts and other liabilities.
- In turn, this means that the personal money and property of the people who run the organisation, and of the members, are at risk if something goes wrong and the the debts and liabilities end up larger than the assets.
Incorporated legal structures
- An incorporated organisation has a separate legal identity from the people who run it. It is a ‘corporate body’. So the organisation can employ staff and agree to contracts in its own right, although of course a human is needed to make that happen. However, that human won’t then be personally responsible for consequent liability.
- Being incorporated provides a significant benefit. This is that liability for anyone involved is limited, usually to a very small amount such as £1 or £10. This amount will be stated in the organisation’s governing document.
- Being incorporated does not mean that an organisation has to compromise its values. A very popular option is to set up as a not-for-profit company, so that all surpluses go back into the organisation. Paying bonuses or dividends to anyone (except employees) is prohibited.
What is the current situation in our Club?
The Club is not incorporated
At the moment, the Club is an "unincorporated association". This means that the Club has no legal identity of its own: it is simply a collection of people who want what the Club offers and who pay for this. As you know, the Club is managed by the General Committee, who are also simply a group of people who wish to help to make the Club succeed.
As described earlier, unincorporated associations do not have the legal protection that comes with being incorporated, ie being a company. This protection is usually referred to as "limited liability". It means that if something goes seriously wrong, resulting in bills that the company cannot pay, the Members and the people who manage the company do not have to make up the shortfall personally, save for a very small token amount that they guarantee. This is usually only £1 or £10. The only exception to this protection is if people have behaved fraudulently or have been recklessly negligent.
The current situation in the Club is that there is no such protection for Members or for the General Committee. This is highly unusual. The vast majority of organisations which employ people, sign contracts with suppliers, take out a lease, provide drinking and dining facilities and offer sporting activities are set up as companies, so that they do not expose their Members or their management to unnecessary financial risk if, for example, they lose an employment tribunal, or are sued for food poisoning as a result of food served in the Club.
This is particularly risky for members of the General Committee, as they are more likely to be the subject of any claims like this.
The Club always has insurance for the General Committee, but some risks are uninsurable, or the premium is so high that it’s just not affordable. This is why hundreds of thousands of organisations in the UK are set up as companies, to give protection to the people who run them and to the members.
The Club’s governance is creaking
It has become clear over the last year that the Club’s constitution (its Rules and Byelaws) is not always fit for purpose. It is unclear in some places, and inconsistent in others. This means that it can be very hard for Members to know where they stand, and for the General Committee to feel confident that they are managing the Club correctly.
This is all fixable – we will go on to start talking about how to make it better.
Screenshot from gov.uk
Screenshot from RYA guidance on how to choose a Club structure
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