Your choice of legal structure
You do not need to form a company. This article is about running an unincorporated “body”. You could be a club, society, association or use any other group name. If on the other hand, you want to know more about whether you should be “just a club” or alternatively whether you should form a company, you should look at Choose the best structure for your club or association. At the end of this article we tell you about a template document you can use to provide a constitution exactly as you decide - but which covers the points we raise here.
Why a good constitution is really, really important
This is a simple one: if for any reason you disagree with a member, committee member or anyone else associated with you, he/she may be disgruntled enough to go to a lawyer. You get a “solicitor’s letter”. You start to worry about how you will find the cost, whether you can defend and so on. Your constitution probably cannot help at this stage.
Now here is the advice: “The better your constitution is structured the less likely it is that anyone else’s solicitor will suggest attacking you.” That is because the case against you will probably be based on your unreasonable behaviour. You have failed to select a particular child for special training for the “Nationals”. You have allowed someone with no driving licence to take your club mini-coach out - the list is endless. So get your system in place and keep it that way and it could save you a lot of money and avoid many sleepless nights.
The constitution - what is in it
Your constitution is where it all happens. It is your rule book and guide. It is not a good idea to change it every week, but certainly you will want to change it from one year to another to keep it up to date with the best way of doing things in your particular organisation. After a few years, you will need less change.
As you are unincorporated, you are wonderfully free. Of course you are subject to the same body of general law as everyone else, but there is no law in the background; no regulator, no inter-state problems.
Here are the main areas you should consider:
- Name and a statement of what you have come together to do
- Who can be members, what rights each member has
- Problems with membership: control versus democracy
- Resignation, suspension and expulsion
- Appointment and removal of Officers
- General management and use of committees
- The annual general meeting and EGMs too
- Who controls the meeting and who gets to vote
- Money management
Name and a statement of what you have come together to do
Of course you need a name. We have no special advice on that except of course to check that it is not used by someone else in a way that could breach their copyright or seem too similar to their company name. As for objects: the reason why this is important is to make sure one or more members cannot turn around in a year’s time and say you are all doing the wrong thing, or failing to do something they thought had been agreed. Get it agreed and there can be no argument later. Of course you can always change course, but it will be done in the most fair way and not at the whim of your most powerful personality.
Who can be members, what rights each member has
This is often overlooked when a club sets up because everyone knows each other well and is more concerned to move forward with your main plan. You need to set out who you will allow to join you, what powers they will have and what qualification they need. If you run a tennis club and want money from members to run it and maintain the courts, you may have to allow unknown people to join. In that case you may need firm and precise rules about anti-social behaviour. On the other hand, if you run a group for accountants interested in reef diving, you are in calmer water and require less strict rules on litter and bad behaviour but maybe stronger rules on voting powers and rotating chairmanship.
Problems with membership: control versus democracy
Membership control often boils down to democracy against control. We all tend to have a “feeling” that democracy is the best way forward, but in running an unincorporated association, that may not be the case. Fairness should mean being fair to those of you who run the club and who put in the time and effort to make it all work. So do not worry about giving the vote to 17 year olds or to new members. You make the rules. Before you do that, there are no rules.
Our only advice here is what you would expect - find someone who takes pains with the detail to be your treasurer and set up a simple system of accountability.
Resignation, suspension and expulsion
This is one of the areas where the rules should be most clear, precise and fair. Among any five people there is always one outlier who is too soft and one who is too brutal. It should never be necessary to discuss a “case” at great length. You have rules - so apply them and be done with it.
Avoid setting up a system of appeals and hearings. You are not in an employment situation. If you want to break your own rules on the soft side, that is fine because it is what you have agreed. But generally, stay cool and stick to them.
Appointment and removal of Officers
This is another difficult area of course. You have a severe disagreement “at the heart of government”. Be careful, tactful, and prepared to take legal advice at the outset. Aim for a low cost divorce. Remember to mention in any settlement that neither side shall be allowed to mention the dispute on social media. That could cause far more damage than the dispute itself.
General management and use of committee
You can set up your management procedures in great detail on no detail at all. Avoid getting bogged down by procedures which may trip you up later. Cover use of sub-committees, agendas, minutes of formal meetings and the rest of the paraphernalia as it is applied to a limited company.
The annual general meeting and EGMs
Disputes around meetings are usually about votes being allowed or disallowed and about the power of the chairman. If you were a company you would find that the Corporations Act makes no mention whatever of rights attaching to the office of chairman. There are none. Despite that, the position of chairman is very powerful because she/he controls your meetings - probably those of the management committee as well as the AGM and any other members’ meeting.
It is a rare chairman who does not make the assumption that he or she is the right person for the role indefinitely. Gradually that person takes over the organisation and sooner or later, there is a revolution. This has happened on an alarming scale in international sport and it could happen to you. Our best advice is “Make the chairmanship revolve - and no casting votes”.
Who controls the meeting and who gets to vote
By definition of the role, the chairman is in a powerful position. He gets to decide what is covered on the agenda and what is minuted as agreed, who speaks and whose points are noted. In a commercial organisation, a strong chairman is often required. In a voluntary organisation, it may be easier to run your organisation through a neutral and gentle person in the chair.
The short advice is “Avoid allowing the treasurer to become a leading figure in the management of your organisation”. She/he should not be given discretion on any expenditure. His/her role should be strictly limited to keeping financial records, looking after the finances and reporting to the committee.
Clubs and not-for-profit organisations tend to last far longer than commercial firms, but sometimes it is necessary to bite the bullet and call it a day. The most important issues to cover are:
Who manages the money side?
and - if there is cash available, who gets it. There is not legal obligation to pay out the members equally. You may decide to divide among people who have been members for at least ten years, or founder members, or as you wish. But you could be challenged if your proposals are made only the week before the doors shut or the division is patently unfair.
You can craft your perfect constitution using our association and club onstitution templates.
Our final thoughts are:
- Get the constitution right
- Make sure it is accessible to every member - best through your website - accessible by password only to members
- Avoid allowing anyone to take too much power
- Be prepared to shout if someone breaks the rules