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Legal Structures

Legal Structures

One of the most important choices you will make when forming your sports club is which legal structure to adopt.

The same issues can arise at a later stage in the club’s development, when it may be appropriate to adopt a different legal structure – either because there is a need to have a more robust structure to ensure good governance and protection against key risks, given the increased scale of the operations or because there are new opportunities (perhaps those related to the community
empowerment agenda) which can only be accessed if the club
adopts a new structure.

The choices are plentiful and it can seem overwhelming deciding which option to take. It’s worth taking your time over the decision and making sure the structure you choose is right for your club, as each structure has its own strengths.

We’ve developed some in-depth guidance here which may be of interest. Should you wish to speak to someone about the choices and support at hand, please don’t hesitate to drop us a note to see how we can help you through the process.

Why Incorporate?

Many clubs in Scotland are unincorporated. This is a suitable setup for small members’ or amateur clubs with no significant assets, no interest in property and who do not employ staff, enter into contracts or other arrangements involving risk.

However, unincorporated clubs have no “legal personality” and their committee members are personally liable for any decisions made on behalf of the club. Would you risk losing your house or savings on the chance something could happen at your club? If you’re involved in a sports club committee and your club is unincorporated you may be doing just that.

That means that any successful legal claim (perhaps for an injury sustained on your premises) made against the club would be brought against the committee members – who would be personally liable if the injury was not covered by insurance and the club had insufficient assets to meet the claim. Incorporating your club will essentially see it become recognised as a legal entity in its own right, giving members limited liability (usually limited to a nominal £1) if there are debts or other liabilities that cannot be met from the club’s funds and other assets.

If your club employs people, holds property (whether owned, or under a lease), enters into significant contracts (eg equipment leases; or a building contract for an extension to the club facilities) and/or carries on significant income-generating activities, there will be potential liabilities and claims (generally rising with the scale of activity) which cannot all be met by insurance. In those circumstances, it would be advisable for the committee to consider whether incorporation – whether as a company limited by guarantee, a registered society (cooperative or community-benefit society) or Scottish charitable incorporated organisation (SCIO) – would be appropriate for the protection of those involved in the club, particularly committee members.

A further benefit of incorporation is that the club would be seen as having adopted a robust legal structure, and that is generally helpful in the context of dealings with potential funders and other partner bodies.