Unincorporated groups

Many community groups will not need to incorporate – for example, if your group will only exist for a short period of time (perhaps because it’s been formed to organise a particular event, or to respond to a particular time-limited issue), or if you don’t intend to seek funding from funding agencies (who often require applicants for funding to be incorporated). In those cases, it may not be worth taking on the cost and obligations of becoming formally incorporated.  

However, it’s important to understand the limitations of remaining unincorporated – for example, the risk that individual members will be held personally responsible for obligations the group takes on. 

Benefits and limitations

Benefits of being unincorporated

  • No incorporation process – You won’t need to follow the administrative process required for incorporated societies. For example, you won’t need to provide an application and supporting documents to show you meet the relevant requirements.
  • Fewer ongoing requirements – You won’t need to take on ongoing reporting requirements. For example, you won’t need to maintain a register of members or file annual financial statements with the Registrar of Incorporated Societies.
  • Fewer costs – You’ll likely have fewer administrative and legal costs as an unincorporated society.
  • Flexibility – By remaining unincorporated, your organisation is free to organise its structure and operations as it chooses. For example, it won’t be necessary for its rules to meet all the requirements of the 1908 Act or the 2022 Act.

Limitations of being unincorporated

  • Membership status is uncertain – The relationship between members in unincorporated groups is often uncertain. There may be doubts about membership rights and obligations, including how people become or resign as members, how complaints and disputes are to be dealt with, and when and how members may be disciplined or expelled.
  • Unclear rules and rights – Unlike incorporated groups, unincorporated groups do not have to have rules. This may make it difficult to resolve disputes. Even when an unincorporated group does have rules, it may still be difficult to prove how the rules were adopted, whether more recent members agreed to them, and whether the rules are binding on members. 
  • No perpetual existence, no legal standing – Unincorporated groups are not separate legal entities. They do not have a continuing existence independent of their members, and they have no legal standing to own property or borrow money in their own name. Because of this it can be difficult to obtain funding.
  • Personal liability – The members of the group’s committee, and possibly all members, may be personally responsible (“liable”) for any obligations the group takes on, and for any judgment made against the group by the courts.

Committee members are likely to be personally responsible for the group’s debts and for debts incurred by an employee of the group, particularly if the committee members knew the debt was being incurred or they agreed in some way to the transaction. They are also likely to be personally responsible to a person who suffers damage as a result of the negligence of an employee or other person involved in the group – for example, failing to organise an event properly. 

Individuals who are liable (either the person responsible for the wrong, or the committee) may have the right to be indemnified (paid back) out of any property the group members hold individually, if the group’s rules provide for this. 

Rules for unincorporated groups

Why have written rules

The rules of unincorporated groups will derive from an agreement between the members, or an implied agreement based on past practice, or both. 

To operate smoothly, an unincorporated group should record its rules and processes for managing the group’s affairs and making decisions. Having detailed written rules helps to determine what is right and wrong if disputes arise. 

What should the rules cover?

It’s good practice to have written rules stating:

  • the group’s name
  • the group’s objects or purpose
  • how a person becomes and stops being a member, and any obligations that members have
  • how the group will resolve disputes between members
  • how general meetings will be convened
  • the method of voting at general meetings
  • what officers (such as chairperson and treasurer) will be appointed to any committee, and how they will be appointed
  • the control of finances and financial accounts
  • how the group’s rules can be changed
  • how to dissolve the group.

Decision-making and management

Decision-making processes

The group’s rules should clearly state its decision-making processes, including:

  • which decisions need to be approved by the ordinary members
  • if voting is to be used, who can vote
  • the procedures for voting (for example, a show of hands) and whether members can vote by proxy, post, email or secret ballot
  • how many people must agree in order for there to be a valid decision (for example, a simple majority)
  • specific decision-making for groups using Te Tiriti informed processes
  • The approach for achieving consensus if this is the preferred decision making process.

Managing the group’s affairs

Most unincorporated groups are managed by a committee of members. 

If the rules require a management committee to be appointed, the committee has no authority to bind ordinary members, unless the rules state otherwise. 

It’s useful for the group’s rules to deal with financial controls and investment of the group’s funds. It will help the group operate smoothly if the rules clearly state who is responsible for keeping proper accounts and the procedures for receiving and withdrawing funds (for example, a requirement for the signatures of two committee members). 

Umbrella organisations and unincorporated groups

If your group does not want to incorporate, it could instead become part of an existing umbrella organisation that is incorporated. This would allow your group to get on with its work without the costs and responsibilities of being incorporated itself (see: “Choosing the right legal structure for your group / National bodies and local organisations”.) 

There should be a written agreement between the group and the umbrella organisation to make sure the relationship is clear. Both sides should get legal advice before signing any agreement. 

An umbrella organisation can receive and pass on any money to groups within its structure, and can charge a handling or administration fee for its services.