Incorporation

Why Should A Sports Club 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”. If your club owns property and is unincorporated, it will be owned in the names of certain members. Therefore, if the club closes owing money, or can’t meet it debts, a creditor can go after the individual members and not just the club’s assets (see here for some examples).

However, once incorporated, a club has a separate legal personality and members will benefit from limited liability, so any debts, losses, or legal claims associated with the club are the responsibility of the club itself.  It also means that if someone wants to raise legal action against the club, it would be raised against the club rather than individuals. Otherwise, committee members would be 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.

Suggested Reading

If you’re now wondering what legal structures might be available for your sports club, check our guidance document here.

Available Support

To date, we’ve supported the incorporation of over 40 sports organisations across Scotland. This includes semi-professional football clubs such as Annan Athletic (as a Community Benefit Society) and Dunbar United (as a Community Interest Company) and multiple amateur grassroots clubs of all sports and sizes (as Scottish Charitable Incorporated Organisations).

Our support includes assistance selecting the right legal structure for your club, drafting a suitable constitution for that legal structure, application to the regulator and transferring assets to the new entity. We have club-specific rules/constitutions pre-approved by regulators which can make the process more manageable, not to mention huge experience in the field. We can often clubs with the entire process for as little as £1000 (although a final sum will depend on any complexities/specific requests your club might have – e.g. if your creating subsidiaries).

Resources