Why incorporate as a society? What are the reasons for doing so, and why not stay an unincorporated association?
All BC societies must file an online transition application by November 26, 2018, or risk dissolution by the registrar of companies. I have received inquiries lately from societies asking why they should continue to be incorporated.
Here is a list of the primary reasons society incorporation is desirable:
- An unincorporated association cannot hold property. All property is held through individual members, meaning it is difficult to ensure property is passed down, land or buildings are leased, or otherwise. There is no individual corporate party with the capacity to contract, only the living members.
- Your unincorporated association may not be able to get a bank account. Though certain financial institutions allow unincorporated associations to have bank accounts, not all will. It is also difficult to have financial controls, and to ensure funds are transferred and tracked directly without a corporate account.
- It is difficult to bring or defend a lawsuit without a corporate personality. The individuals members may be sued in their personal capacity, or may need to bring an action individually or as a group to collect a debt or enforce a right, rather than the society bringing it in its corporate name.
- You may not be able to get insurance. Your association may not be able to obtain insurance, either vehicle, general, or directors and officers without a legal vehicle such as a society.
- There are no dispute resolution mechanisms. Without the Societies Act dispute resolution mechanisms, member disputes may occur with no recourse, other than a lawsuit on an “implied” contract. Without the requirement for bylaws (which form a contract between members and the society), there may be needless litigation in contract which could be dealt with more swiftly by use of the terms of the Act.
- You may be ineligible for funding. Funding agreements may be invalidated, or new agreements may not be able to be entered, without an incorporated society.
There’s always more advantages, but the primary ones are listed here. For many small clubs without assets or liabilities, continuing on as an unincorporated association is fine. However, as these voluntary groups grow, it is advisable to decide on an appropriate non-profit vehicle, whether it is a society, Canada Not-For-Profit corporation, co-operative, charitable foundation or otherwise.
Photograph by A. Davie under a Creative Commons license. No changes were made to this image.