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Unincorporated Associations Notes

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This is an extract of our Unincorporated Associations document, which we sell as part of our Trusts and Equity Notes collection written by the top tier of Oxford students.

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Unincorporated Associations Cts reluctant to allow trusts to operate outside the accepted 'gifts of imperfect obligation' (Re Endacott) but they have been asked to consider how gifts to a group of people should be interpreted. The policy underlying the anomalous exceptions is to encourage community benevolence. If a gift to a small community club is not charitable then it may fail, defeating the intention of the donor and the policy of community benevolence. These small groups often take the form of unincorporated associations. 'Unincorporated associations': According to Lawton LJ in Conservative Central Office v Burrell [1982], there must be two or more members bound together for one or more common purpose, mutual rights and duties between the members, and rules governing who controls the association and how its funds are used; the members must be able to join and leave the association at will. These groups are not covered by the Companies Act 1996. Hence they have no legal personality, existing in their own right, and cannot own property. How are the assets of an unincorporated association held?
Gifts to, and trusts for, unincorporated associations are problematic because they are not legal persons and so cannot themselves hold assets. What happens to any surplus funds depends on how the money was held when the association was in existence.Re Recher's WT [1972]; There are four accepted ways that the gift of property to an unincorporated association can be interpreted as being held:

1. An outright gift to the members to hold as JTs or Ts in C. Any member can sever.

2. A gift on trust for the association's purpose - void under the beneficiary principle and potentially for perpetuity, unless the association is charitable.

3. A trust for the members and future members of the association. Must be limited to the perpetuity period.

4. An outright gift to the members as JTs subject to their own contractual obligations. Gift to existing members as an accretion to their funds and dealt with by the association's rules - *contract holding theory*.

Issue: Dissolution of unincorporated associations - When an unincorporated association dissolves, problems arise as to the ownership of any surplus funds. On one view at least, this is a matter of an automatic resulting trust, but the case law provides no one consistent answer.Re William Denby Sick and Benevolent Fund [1971]; Brightman J identified four methods of dissolution: (i) voluntary dissolution by the members; (ii) an event leading to automatic dissolution; (iii) 'permanent loss of substratum' and (iv) winding up by the court.

NB. 'A cataleptic trance may look like death without being death': Megarry V-C (Re GKN Sports and Social Club
[1982]). The four methods of holding property: If the surplus money is held by the members or the treasurer (on trust for the members) then it goes to the members on dissolution. Normally given in equal proportions unless the association rules say differently. The right to the money is not based on contributions, it depends on membership. However, sometimes it is not possible to say that a contributor gave money to the members. Perhaps he did not want to benefit them. For example, if the society is outward looking (i.e. purpose not meant to benefit the members, e.g. political society). Or if the settlor gave his money for a very specific purpose his purpose would be negated if the members held fund. In such a case an analysis of how the money could be held is necessary:

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