Unincorporated Associations
What is the Problem with Unincorporated Associations?
A donor might want to make a gift to a non-incorporated, non-charitable association such as a club or a society.
This is problematic, because these organisations are not a legal person, and so cannot own property interests. Any gift or trust made in favour of an unincorporated organisation therefore seems to offend the beneficiary principle.
To get around this, there are four kinds of valid gift that can be made to these organisations: Re GKN Bolts and Nuts Sports and Social Club [1982] 2 All ER 855
- An absolute gift to the organisation’s current members;
- A trust for the organisation’s current members;
- A trust for the benefit of the organisation’s present and future members;
- A mandate to the organisation’s officers to use as the donor directs.
Absolute Gifts to Current Members
This is the way that gifts to unincorporated associations are usually construed.
Normally, the gift is construed as requiring the association to hold the gift subject to each members’ contractual rights and liabilities towards each other: Neville Estates v Madden [1962] Ch 832. If so, no member can sever their share and it will accrue to the other members (including those who joined after the gift was made) when they die or leave the organisation. Sometimes, however, the gift is made without any limitations, in which case any member can sever their share.
Trust for Members
If the gift calls itself a ‘trust’, or it is clear that it was intended as a trust, it will normally be construed as a trust for the current and future members. Sometimes, it will be construed as a trust for current members only: if that is what the settlor appeared to intend.
This is one of the ways in which the courts have saved private purpose trusts from being void for lack of a beneficiary: Re Denley’s Trust [1969] 1 Ch 373.
Mandates
A gift made this way imposes a mandate on the unincorporated association’s officers to apply the gift towards the purposes of the association: e.g. Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522.
This way of doing things is not truly a gift. Instead, the donor has essentially appointed the organisation’s officers to act as their agent and use the donor’s property accordingly.
Since an agency is a personal relationship, this method can only be used while the donor is alive.
Gifts to Unincorporated Associations and Perpetuity
Gifts to unincorporated associations may implicate the perpetuity rules:
An absolute gift or trust to members will contravene the rule against inalienability of capital unless the association’s rules allow the members to dissolve the association and divide the gift among themselves: Re Grants Will Trusts [1980] 1 WLR 360.
It is rare for a donation to contravene the alienability rule, however. This is because associations can normally dissolve themselves by unanimous agreement unless some rule states otherwise: Universe Tankships Inc of Monrovia v ITWF [1983] 1 AC 366.
Absolute gifts are not contingent: they do not implicate the rule against remoteness of vesting. A trust for members might implicate this rule if contingent. In particular, trusts including future members are contingent and must comply with the perpetuity period: Re Leahy [1959] AC 457.
Since 2010, non-charitable trusts have been exempt from the rule against excessive accumulation: Perpetuities and Accumulation Act 2009, s.13. Donations to unincorporated associations do not implicate this rule, therefore.
Dissolving an Unincorporated Association
There are four ways an unincorporated association might end: RE GKN Bolts and Nuts Sports and Social Club [1982] 1 WLR 774.
- By a method specified in the association’s rules;
- If all current members agree to end the association;
- By an order under the court’s inherent jurisdiction;
- When the fund no longer has any effective purpose (‘loss of substratum’).
The fact that the club has merely ceased activities does not mean it has dissolved unless the only reasonable inference is that one of the above grounds is met: Keene v Wellcom London Ltd [2014] EWHC 134 (Ch).
