Unincorporated Non-profit Associations Act 2008

CIVIL LAW SECTION

A JOINT PROJECT OF THE UNIFORM LAW COMMISSION,

THE UNIFORM LAW CONFERENCE OF CANADA, AND

THE MEXICAN CENTER OF UNIFORM LAW

TO CREATE A HARMONIZED LEGAL FRAMEWORK

FOR UNINCORPORATED NONPROFIT ASSOCIATIONS IN NORTH AMERICA

UNIFORM UNINCORPORATED NONPROFIT ASSOCIATIONS ACT

Readers are cautioned that the ideas or conclusions set forth in this paper, including any proposed statutory language and any comments or recommendations, may not have not been adopted by the Uniform Law Conference of Canada. They may not necessarily reflect the views of the Conference and its Delegates. Please consult the Resolutions on this topic as adopted by the Conference at the Annual meeting.

Québec, QC August 10–14, 2008

INTRODUCTION

[1] There are three primary modes of collective nonprofit activity: the nonprofit corporation; the charitable trust; and the unincorporated nonprofit association (UNA). The residual, or default, mode is the UNA. Whenever people join together and agree to pursue common nonprofit purposes and they do not take the steps required by law to incorporate their group or to form a charitable trust, then, in the eyes of the law, they form a UNA. As a result of this default status, a large number of types of organizations can be classified as UNAs—everything from small-scale charities, clubs, and athletic teams and associations to larger bodies such as political parties, trade unions, and religious organizations.

[2] In 2005, the Uniform Law Conference of Canada (ULCC) entered into a joint project with the Uniform Law Commission (ULC) (formerly known as the National Conference of Commissioners on Uniform State Laws), and the Mexican Center of Uniform Law (MCUL) to create a harmonized legal framework for UNAs in North America. In 2007, the Joint Drafting Committee agreed on a Statement of Principles[1] that each country has used as the basis for its draft legislation. The Uniform Unincorporated Nonprofit Associations Act (the Uniform Act) that follows this introduction is one part of the ULCC contribution to this joint project. The ULCC Team has also drafting amendments to the Québec Civil Code, which are contained in a separate document. This approach reflects the fact that the law of Québec already has a legislative framework for UNAs[2] and is, in all respects, considerably more advanced than the law that prevails in common law Canada in connection with UNAs.

[3] A good summary of the basic elements of a UNA at common law is found in a judgment of Lawton L.J. of the English Court of Appeal, who described a UNA as “. . . two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organization which has rules which identify in whom control of it and its funds rests and upon what terms and which can be joined or left at will.”[3] This summary must be supplemented by an important point for understanding the legal nature of a UNA. At common law, a UNA is not a legal entity that is separate from its members. This position is largely responsible for the arrested development of the law of UNAs in common law Canada.

[4] In fact, it is something of a misstatement to say that there is a law of UNAs in the same sense that there is a law of corporations or a law of trusts. Instead of a coherent legal framework for UNAs, there is merely a series of rules drawn mainly from the law of contracts, agency, and trusts that the courts have applied to UNAs. Most of these rules were developed by the English courts in the nineteenth century. They tend to reflect both the social conditions of that time and a lingering judicial distaste for unincorporated bodies that were, until the late eighteenth century, actively suppressed by the government.

[5] The common law rules governing UNAs have come into conflict with modern policy goals, particularly in the area of labour relations, and they have been overridden by the legislature for certain types of UNAs in certain specific circumstances.[4] More recently, the courts have begun to reform some of the basic assumptions about UNAs. The leading case is the 1996 decision of the Supreme Court of Canada in Berry v. Pulley.[5] In Berry, the court began the process of unraveling the central thread of UNA jurisprudence: the conclusion that UNAs are not legal entities separate from their members. The court decided that, since trade unions are given legal entity status for certain purposes spelled out in labour relations statutes, this status could be extended to apply to an issue that is not addressed in the governing legislation.[6]

[6] The Supreme Court of Canada was careful to limit the scope of its reasoning in Berry. It concluded that the courts should follow the lead of the legislature in reforming the law of UNAs.[7] While this is a reasonable conclusion, it has the potential to cause further fragmentation and incoherence in the law. On the one hand, certain UNAs such as trade unions and political parties may be accorded entity status while, on the other hand, small-scale UNAs such as clubs, sports teams, and neighbourhood associations continue to be saddled with an out of date and confusing legal regime.

[7] The Uniform Act is intended to remedy these deficiencies in the common law by establishing a coherent legal framework for UNAs. It was drafted with the concerns of small-scale informal UNAs uppermost in mind. Many of the provisions of the Uniform Act are framed as default rules that are intended to give some basic structure to these informal bodies. All UNAs would be able to modify these default rules.

[8] The Uniform Act addresses the following issues: (1) definition and types of organizations covered; (2) the application of the Act and its relationship to other laws; (3) the legal status, capacity, and powers of a UNA; (4)claims and liabilities; (5) governance—including the rights of members and the powers and duties of managers; (6) dissolution and winding up; and (7) mergers. The basic approach of the Uniform Act is to treat a UNA as a legal entity in addressing these issues. In addition, the Uniform Act is intended to supplement, rather than displace, existing laws that may apply to specific types of UNAs (such as trade unions). Finally, many of the provisions of the Uniform Act are geared to the nonprofit corporations statute of the enacting jurisdiction. This approach is intended to ensure that the enactment of the Uniform Act does not create an artificial disincentive to incorporation.

Next Annual Meeting

2018 Conference (Centennial)

Delta Hotel

Québec City, QC

August 12 - 16, 2018