Unincorporated Non-profit Associations Statement of Principles 2007





A. Preamble.

In 2005 the National Conference of Commissioners on Uniform State Laws (NCCUSL), the Uniform Law Conference of Canada (ULCC), and the Mexican Center on Uniform Law (MCUL) decided to undertake a joint project to create a harmonized legal framework for Unincorporated Nonprofit Associations in their respective countries. The first task was to create a set of basic principles which will then be incorporated into the unincorporated nonprofit association statutes developed by NCCUSL, ULCC and MCUL. After approval, these organizations will seek to have the statutes they promulgate adopted throughout their respective countries.

This joint project is modeled on the European Union (EU) legal harmonization projects which set forth minimum standards and principles that must be incorporated into the statutory and regulatory framework of each of the EU members. This process has been quite successful in creating a harmonized legal structure in the EU, which has both common law and civil law based legal system countries. The leadership in NCCUSL, ULCC and MCUL concluded that the EU model should be applicable to the current NAFTA countries where the United States and Canada (except for Quebec) have common law legal systems, and Mexico and Quebec have civil law legal systems.

Unincorporated nonprofit associations (UNAs) were chosen as the basis of the first NAFTA harmonization project because all three participating organizations had legal reform

projects involving UNAs high on their respective priority lists. In the United States, UNAs are governed by a hodgepodge of common law and state statutes. Traditionally, UNAs have been treated under an aggregate theory of organization rather than as a separate legal entity. In most states statutes have been enacted to ameliorate some of the adverse consequences of the aggregate theory (e.g., allowing a UNA to hold and convey property in its own name and to sue and be sued in its own name), but these statutes are for the most part (California is an exception) not comprehensive or integrated. NCCUSL promulgated the Uniform Unincorporated Nonprofit Association Act (UUNAA) in 1996. UUNAA, which has been adopted in 12 states, deals with only a limited number of issues (tort and contract liability, owning and conveying of property and suits by and against a UNA), and NCCUSL determined in 2005 that it needed to be updated and made more comprehensive.

The current law governing UNAs in Canadian common law provinces is similar in many respects to the laws of United States due in large part to the historical treatment of UNAs under the aggregate theory. Piecemeal reforms have occurred from time to time but no comprehensive, integrated reform of laws governing UNAs has been undertaken.

Quebec and Mexico have similar civil law legal systems and their codes treat UNAs as legal entities rather than as aggregates for most purposes. Their code treatment of UNAs is more complete than in the United States and common law Canada, but significant reforms in both codes are necessary to incorporate the basic general principles set forth in this document.

A UNA is the default form of nonprofit organization; that is, a nonprofit organization is a UNA if no steps have been taken to become another organizational form, for example, a nonprofit corporation or a trust. UNAs may be classified as public benefit, mutual benefit or religious organizations and may or may not be tax exempt. There are hundreds of thousands of

UNAs in North American countries including unincorporated nonprofit philanthropic, educational, scientific and literary clubs, sporting organizations, unions, trade associations, political organizations, churches, hospitals, and condominium and neighborhood associations. Their members may be individuals, corporations, other legal entities or a mix.

This document sets forth the basic principles that the countries engaged in this project will incorporate into their UNA statutory framework governing an unincorporated nonprofit association. These principles deal with the following issues: (1) definition of the types of organizations covered; (2) the relation of the principles to other existing law; (3) the ability of a UNA to own and dispose of property and to sue and be sued in its own name; (4) the contract and tort liability of a UNA and its members, and managers; (5) internal governance, fiduciary duties, and agency authority; and (6) dissolution, merger and conversion (transformation).

The ideal format is to have all of these principles incorporated into a single chapter of the enacting jurisdiction’s code of laws in a manner that conforms to the jurisdiction’s statutory drafting conventions. The objective is consistency of basic principles governing UNAs between the enacting jurisdictions, not necessarily identity of statutory language. That is why the term “harmonized legal framework” is used rather than uniform act to describe this project. If the enacting jurisdiction already has statutes incorporating some of the basic principles, it may be appropriate under the enacting jurisdiction’s drafting conventions to utilize cross-references to these other statutes in the UNA chapter rather than to move these provisions to the UNA chapter. An enacting jurisdiction might also want to cover additional issues in its UNA statute. The Appendix contains a partial list of these issues and, in some instances, examples of statutory language from existing statutes.

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August 2021

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