Winding up clubs, societies and associations

With people’s tastes and interests changing alongside other societal changes generally, are we seeing a decline in clubs, associations and/or societies?

Organisations, run for the benefit of the members (as opposed to for profit or for gain) can be registered (under the Cooperative and Community Benefit Societies Act 2014 (“CCBSA14”)) or unregistered and can take different forms. Whilst there is no statutory definition of an unincorporated association, an established common law definition provided by the Courts in Conservative and Unionist Central Office v Burrell [1982] WLR 522 includes “two or more persons bound together for one or more common purposes, not being business purposes, but mutual undertakings each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined and left at will.”

The Court went on to note that “the bond of union between the members of an uncooperative association has to be contractual” and accordingly, it is now accepted that an organisation cannot be an unincorporated association unless there is contractual bond between its members, invariably its rules.

As you may also be aware, associations/societies can enjoy the benefits and privileges by registering with the FCA under the CCBSA14 which includes an ability to sue or be sued in its registered name, hold property and, quite importantly, members enjoy a limited liability. However, deregistration – the most common reason for this being the non-filing of annual returns or other requirements of the FCA, with whom the registration is maintained) results in these privileges being lost. To repeat, an unincorporated association/society has no legal personality separate from its members and so does not enjoy limited liability.

This is particularly relevant where the association/society is looking to wind-up its affairs, either via dissolution or through the insolvency regime, as:-

1. Where an association/ society is registered with the FCA pursuant to the CCBSA 14, then the winding-up procedures available to a company are also available to it pursuant to section 123 CCBSA 14, to include both voluntary liquidation routes
2. Where the organisation is unregistered and unless formed for gain or profit, it is unlikely to fall within the definition of an unregistered company within the meaning of section 220 of The Insolvency Act 1986 and therefore cannot be wound up pursuant to the provisions of Part V of the Insolvency Act 1986. Accordingly, this then leaves the unincorporated association’s only route to wind-up (outside of a dissolution) is by applying to Court under the Court’s inherent jurisdiction to wind-up an organisation
3. An organisation can, of course, be dissolved pursuant to its own rules, which unfortunately may contain a number of gaps and/or deficiencies leaving those involved seeking and/or relying upon guidance from case law.

All this is extremely relevant to the members of an association/society in particular those on the committee where the purpose, desire, longevity of the association/society has run its course, member numbers are dwindling and/or it is going to run out of money and the committee – and its members – are being asked to consider their options, what to do and how to do it.

Unfortunately, therefore, despite clubs, associations and societies having been around for quite a while, the law around them can be fragmented, and what aspect of it and/or any supporting case law will depend largely upon the nature, and activities, purpose and registration of that organisation.