Legal reforms to grant greater protection for Scottish associations

Golf clubs, charities, residents’ associations and other groups that are not set up as limited companies could enjoy greater protection if reforms in the law on “unincorporated associations” are put into effect.

Consultation on the proposals, drafted by the Scottish Law Commission, closed earlier this month. If enacted, Scottish unincorporated associations would be the first in the UK to enter contracts in a similar way to a limited company, without members of the association, who are often volunteers, taking on personal liability.

The SLC makes three alternative proposals:

* Optional acquisition of legal identity upon registration in a new public register

This would be similar to continental legal systems such as those of France and Germany.

* Optional acquisition of legal identity by expression of intention to do so

This would not require an entry in a public register but would need to be included in the documents setting out the association’s “constitution”

* Automatic attribution of legal identity where an association meets certain specified criteria. The criteria could include minimum number of members, minimum asset value, minimum annual income or turnover, or the adoption of a “constitutive document” containing certain essentials (such as provision for the distribution of assets on winding up).

The Scottish Council for Voluntary Organisations said that it broadly welcomed the proposals, as long as “the proposal remains simple and non-bureaucratic… whatever happens, the result must not lead to further regulation, bureaucracy, and burdensome resource implications (both financial and human) for the voluntary sector.”

The Institute of Chartered Accountants of Scotland also welcomed the reforms, which it said could help unincorporated associations to secure insurance against public liability, employer’s liability and other risks at a realistic cost. At the moment, associations may be carrying out their activities without a full appreciation of their exposure to liability or without any insurance cover at all.

Christine Scott, ICAS assistant director, charities and public sector, said: “These proposals could enable Scotland’s 45,000 non-profit making associations to act in the interests of local communities with confidence that their volunteers are protected from any undue financial risks. There will be benefits too for those who supply goods and services to associations by establishing the association, rather than its volunteers, as the purchaser in any transaction.”

She added that reform in England and Wales should follow the example of Scotland in order to ensure that there are no additional compliance burdens arising from local differences.