At Issue
Uniform Unincorporated Nonprofit Association Act: Security and
Legality
Citizens taking voluntary action in
their communities need to be secure in their efforts. This Act serves
that purpose.
By Rep. David Cullen
Thousands of associations of people in the United States fall into
the category of unincorporated nonprofit associations. Ranging from
local neighborhood associations to national associations with large
memberships, they all are associations that for one reason or another
cannot or have not chosen to become not-for-profit corporations.
The UUNAA provides five major benefits to nonprofit associations,
among them conferring legal entity status upon the association separate
from its members and limiting members' liability in tort and
contract.
Common law traditionally has not recognized unincorporated nonprofits
as separate legal entities. They cannot own or hold real property. Such
associations cannot sue or be sued as associations. Individual members
may acquire liability simply because of membership in the association,
no matter how casual. Acting as officers and directors may provide
individuals with serious liability exposure, and finding insurance may
be nearly impossible.
These drawbacks discourage voluntary participation in the activities
of such associations; yet such associations are essential to the
well-being of every community, large or small, in the United States.
I believe we have found a remedy to these unnecessary barriers to
participation. I am in the process of introducing into the state
Legislature the Uniform Unincorporated Nonprofit Association Act
(UUNAA). This bill mirrors the measure promulgated by the Uniform Law
Commissioners in 1992. Currently, nine states have adopted the UUNAA,
and it has been introduced in three others in 1997 alone.
UUNAA defines unincorporated nonprofit associations broadly as
unincorporated organizations "consisting of [two] or more members joined
by mutual consent for a common, nonprofit purpose." Members may be
individuals, corporations, other associations or governmental agencies.
The Act does five things for these associations and their members:
- provides them with the legal capacity to receive, hold and transfer
personal and real property;
- limits the liability of association members and functionaries for
tort and contract;
- provides them standing to sue and be sued as associations;
- provides a procedure for disposing of an inactive association's
property; and
- permits designation of an agent for service of process.
It does all of these things without requiring any association to
conform to a registration statute, to pay fees to the state to qualify
for the benefits of UUNAA or to submit to any mandated form of
organization and method of governance.
UUNAA permits a nonprofit association to acquire, hold, encumber or
transfer interests in real or personal property in its own name. An
association can receive property from an estate. To facilitate holding
and transferring real property, an association may, but is not required,
to file a statement of authority in the real property records. Any
person dealing with the individual named in the statement of authority
and who gives value without notice that conferred authority is invalid,
may regard the authority conferred as conclusive.
UUNAA provides that any association subject to it is a separate legal
entity, separate from its members. A person is not vicariously liable
for the association's torts or contracts merely by virtue of being a
member, being considered a member or participating in any way in
managing the association. Members may sue a nonprofit association and
may be sued by it.
Concomitantly, the association has standing to institute, defend,
intervene or participate in any proceeding, judicial or otherwise, that
involves it. It may assert a claim on behalf of members if one or more
members have standing to assert the claim in their own rights. A
judgment against an association is not by itself a judgment against any
member.
UUNAA provides for disposal of the personal property of an inactive
association, first, to anyone entitled to that property in association
documents. If there is no such document, then a cy-pres rule applies:
the property must be transferred to another association pursuing broadly
similar purposes. These transfers apply to associations that have been
defunct for at least three years.
Rep. David Cullen (Dem.), Marquette 1984,
has represented the 13th Assembly District since winning a special
election in May 1990. He thanks the staff of the National Conference of
Commissioners on Uniform State Laws for helping to prepare this
article.
Lastly, UUNAA permits, but does not require, a nonprofit association
to appoint an agent for service of process. This facilitates the
association's legal rights accorded it in other UUNAA sections.
These are some of the benefits of UUNAA to the many millions of
people who aggregate into associations for everything from sport to
neighborhood improvement. Citizens taking voluntary action in their
communities need to be secure in their efforts. This Act serves that
purpose.
I always welcome input and opinions from others. If you have any
questions or comments regarding this proposal, please call me at (608)
267-9836.
Wisconsin
Lawyer
