Would incorporation suit your sports or social club?

27/02/2019

Are you a committed member of a sports or social club? Perhaps your days of active participation are now behind you but wishing to remain involved you’ve taken on responsibility with a leadership role within that club.

Maybe you’re simply one of the good souls of society who’ve decided to get involved despite already spinning numerous professional and private plates. And hats off to you for doing so – many sports and social clubs simply wouldn’t continue to thrive and provide a vital community resource without you and your peers. But have you considered the legal and financial responsibility that comes with that?

Simply, any club which operates as an ‘unincorporated association’ is not a legal entity in its own right. Instead, it is an association of its individual members who have chosen to run a club for the benefit of its members, themselves included. By definition, this means that a club set up in this way cannot own assets, enter in to contracts, nor can ‘it’ employ people.

Instead, in this situation, it is the management committee members that will be entering into contracts and employing people. This means that if claims are made under those contracts or by staff, those claims will be made against the committee members. Also, assets, such as land, will be vested in trustees who hold the legal title to the land, on behalf of the members. What is important here, is that should anything go wrong with an unincorporated association, the management committee members within will be held liable.

But there is an alternative and it’s one that we’re often asked about. ‘Incorporation’ is the transfer of the business (or club, in this instance) and its assets in to the ownership of a limited company. This limited company then becomes the operator of the club and is recognised as a legal entity which can own assets, enter in to contracts, employ people and sue and be sued. Perhaps of greatest significance is that when something goes wrong or when the club suffers an unexpected claim which isn’t insured, then it is the ‘company’ that remains liable and recourse to its members is prohibited.

The same cannot be said for unincorporated clubs where, in the event of a liability which cannot be met from club funds, responsibility falls to the members of its executive committee. Is that a risk you’re willing to take on?

Incorporation doesn’t have to be a terribly complex process to go through.

The first things to cover off include: does there exist a sufficient level of support amongst the executive committee and wider member base; are you clear on exactly what the club’s assets, liabilities and contractual commitments include; and are there any tax consequences?

With the groundwork complete, you will need to proceed with the establishment of the new company; ensure that the club passes the necessary resolutions and then transfers its assets (and liabilities) to the new company.

It is always advisable to engage the services of a reputable legal advisor. Here at FBC Manby Bowdler, we have advised a steady stream of sports and social clubs, as well as other membership organisations, for whom incorporation has posed an attractive option for future growth and stability.

To find out more, contact Stuart Rea on the details below.

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