An unincorporated group can be any group of people that gets together for some purpose, whether it is to change something in the community, provide some service, work on a project or simply to socialise. Nearly all groups start off informally, without a highly organised structure or any legal standing, and small groups may decide they don't need to formalise these things. In New Zealand, the largest proportion of not-for-profit institutions (61 per cent) are unincorporated societies.
Typically, an unincorporated group will have some key features:
- no separate legal identity or legal status
- members may be able to come and go at will
- there may be a written or oral contract between the members
- the start date will be the date on which the group was formed.
Rules and processes
As a matter of good practice, an unincorporated group should record its rules and processes for managing the group's affairs and making decisions. These rules could be based on the group's past practice and should be agreed upon by all your members. Although there is no legal requirement for writing down your rules, it will help your group operate smoothly and will also be useful if any disputes arise, especially if there are assets or money involved.
There are some advantages of a group being unincorporated, including:
- few legal or administrative requirements
- flexible structure, with few rules or restrictions
Some limitations of unincorporated status include:
- membership status is uncertain
- members may be personally liable for debts and other obligations
- unincorporated groups are not separate legal entities so they have no ongoing existence that is independent of their members and no legal standing to enter into contracts, own property or borrow money
- there is no legal requirement to have rules, so resolving disputes can be problematic.
|Tip: Unincorporated status tends to suit groups that are social in nature, or groups that have formed to address an urgent, short-term issue. It may be easier and cheaper to remain unincorporated, however, members should be aware that everyone in the group could be personally liable for any potential debts.|