Should my sports club be considering incorporation?

• Published date: 16 February 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law
• Law Firm: Wrigleys Solicitors
• Author: Ms Hayley Marsden

The governance and structure of sports clubs should be reviewed on a regular basis, which may involve considering incorporation.

There are many benefits to becoming an incorporated body. The key advantage is the establishment of a separate 'legal personality', which reduces the personal risk which members and officers of clubs could otherwise be exposed to.

Why does incorporating reduce risks to officers and members of the club?

Having a separate legal personality means that the incorporated body can enter into contracts in its own name and hold its own assets and liabilities. This means that any liability taken on under such agreements is the liability of the organisation and not of the individuals (whether trustees, committee members or members of the club), which would otherwise be the position if you are not incorporated. It is also administratively easier, because those individuals are not signing contracts or holding assets in their own name, on behalf of their club.

It also means that, if the organisation runs into trouble, it is generally the incorporated organisation itself which is on the hook, rather than individuals involved in the club. The personal assets of individuals are therefore usually protected (subject to some limited exceptions). By contrast, the position for an unincorporated body is that liabilities will be in the name of the individuals involved. This means that there is a personal risk taken on by an individual when becoming involved with an unincorporated body.

There are some exceptions to the limited liability offered by an incorporated structure, where individuals could still be held personally liable, including if they give personal guarantees, if they breach their duties as trustees, or where the law requires personal responsibility (e.g. in relation to certain criminal, insolvency and environmental matters). However, incorporation gives individuals much better protection than they have with the unincorporated club.

Where clubs employ staff, enter into contracts or have an interest in land, the risk to the managing individuals increases. If a club is unincorporated, there can be a barrier to recruiting new trustees or committee members who are concerned about the risk to their personal assets.

Sporting governing...