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Vol. 70, No. 10,
October 1997
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
| 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. |
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.
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.
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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. | 