'Governance' refers to the process of running your sports club, making decisions and
ensuring that it is properly accountable; this differs from 'management' which is
concerned with organising the day-to-day activities of the club. To be an effective
and accountable organisation, you need to ensure that you have good governance
arrangements in place.
The Home Office also runs a very useful website called The Governance Hub which
provides codes of conduct and useful guidance on all aspects of voluntary and
community sector governance matters. It's linked from the Resources panel. The
site refers specifically to England and Wales though many of the principles will apply
elsewhere.The national Sports Councils run several Modern Sports programmes
designed to support the committees and boards of sports organisations to deliver
efffective governance. Contact your national Sports Council for more information.
Club structures
When establishing your club, the members will
need to select the most appropriate form of legal
structure for the organisation so that it can be
formally recognised, open a bank account, enter
into agreements for hiring facilities, and be
accountable to the membership. In this section, we
explore the two main legal structures - an
unincorporated association, and a limited company
- and provide some additional notes about
registering as a charity. This is a complex subject
and we strongly recommend if you are considering
establishing as a Limited Company that you seek
professional advice.
Unincorporated Association

This is the most common structure used by the vast majority of sports clubs. The
members come together and agree to establish the club with its own rules and
operating procedures. These are then set down in the Constitution (see menu
for more on Constitutions).
This is the simplest form of club structure, the easiest to run and operate, and the
one that most members will be familiar with. It's an "Association" because the club
does not have a separate and distinct legal identity. For legal purposes, the club is
regarded as a voluntary coming-together of its members - literally, an association of
members.
An Unincorporated Association structure is most suitable for:
The majority of small local clubs
Clubs without significant buildings, equipment, or financial assets
Clubs that provide services primarily for their own members (rather than the general
public)
Clubs that are not engaged in high-risk sports where accidents are far more likely and
potentially costly if negligence could be proved
Clubs that protect themselves against third party liability and negligence through a
standard insurance policy for their sport
One consequence that you should be aware of with this type of structure is that - on
the rare occasions that something does go seriously wrong - ALL the members of the
association are liable. So, if the club goes bankrupt, all the members could be liable
for the debts, irrespective of their individual financial circumstances. Because this
liability is unlimited, those with more wealth could be hit harder than those with
relatively little money.
On the positive side, unincorporated associations are simple to set up and run. You
don't need permission from anyone else. You create your own constitution and run
your own affairs within these rules. With a constitution, you'll be able to open a bank
account and organise your finances. If you want to borrow money, one of your
members will probably need to provide the lender with a personal guarantee or
security for the loan.
Most clubs are able to insure themselves against the more common risks and your
National Governing Body is likely to offer an insurance scheme that you can join.
Incorporation as a Limited Company
Forming or converting your sports club to a Limited Company enables your club to
become established as a legal entity in its own right, separate from the individual
members. There are two forms of Limited Company:
1. Companies with an issued share capital, where ownership and control lies with the
shareholders. This form is generally inappropriate for sports clubs.
2. Companies limited by guarantee, where the members of the company each guarantee to
pay a nominal sum (usually up to £5 each) in the event of the company being unable to
meet its obligations. This form is usually used for sports clubs wishing to incorporate as a
company.
There are several advantages to this structure. Because the club is a distinct legal
entity, it is easier for the club to enter into contractual arrangements e.g. to borrow
money, own buildings, or stage very large events. The club itself, rather than the
individual members, are responsible for the club's obligations and debts (unless one
of the officers has acted negligently or fraudulently, in which case the individual
remains personally liable). And the individual members can only be held responsible
for the debts and obligations of the club up to the nominal value of their guarantee.
The regulation and administration of Limited Companies is more onerous, and there
are legal penalties for failure to comply. All Companies require various legal
instruments such as a Memorandum and Articles of Association, and these must be
registered with Companies House. The annual accounts must be presented in a
prescribed form for Companies and also lodged with Companies House where they are
open for public inspection. All Companies are subject to the provisions of Company
Law; they are run by "Directors", and some club members may potentially be
prohibited from becoming a Director because of their previous involvement with other
companies or their financial status.
You should consider forming as a Limited Company if one or more of the following
apply to your club:
You own a high value of assets in the form of buildings, facilities, or financial reserves.
However, some clubs have found a significant capital gains tax may be liable if they own
considerable assets.
You are engaged in selling significant volumes of goods and services to non-members
such as training courses, accreditation, equipment, lettings, books and other materials
You are planning to organise a major event where there is a potential risk of significant
financial loss (in which case, you might consider establishing the event as a limited
company owned by your club)
Mutual Society and limited liability
In recent years, a few clubs seeking to become incorporated and obtain the benefits
of limited liability have begun to explore registration as a Mutual Society. The
relevant legislation - the Industrial and Provident Societies Act, 1965 - is relatively
little known and was created to regulate such organisations as cooperatives, mutuals,
housing associations and working mens' clubs. In many respects it is ideally suited
for larger membership sports clubs.
Mutual Societies are overseen by the Financial Services Authority, and they must
approve all rule changes and receive a copy of the annual accounts. In general
though, there would appear to be a relatively light touch.
In most instances, the structure, management and governance of the club remains
entirely unchanged by converting to Mutual status. Control remains with the
members. A few technical changes to the rules may be required. Mutual status does
confere limited liability on the members, and establishes the club as a legal entity in
its own right, capable of entering into contracts as a corporate body. In many
instances, this will be a cheaper and more flexible route than incorporation as a
Company Limited by Guarantee.
Registered Charity
The Charities and Trustees Investment (Scotland) Act 2005 and the similar Charities
Act 2006 (applying to England and Wales) have both introduced modernising reforms
to charity legislation. It is now possible for sports clubs to apply for registration as a
charity.
There are two main benefits. Charitable registration establishes your club as a
corporate body and legal entity (as distinct from the voluntary association of
members in an unincorporated body). Charities are also able to benefit from more
favourable tax treatment including Gift Aid on donations, discretionary relieft on rates,
and other tax benefits.
The meet the charitable registration requirements, your club must meet two criteria.
First it must provide one of several charitable purposes. These now include: "the
advancement of public participation in sport" where sport is defined as physical skill
and exertion and which have a health benefit; and "the provision of recreational
facilities, or the organisation of recreational facilities, with the object of improving the
condition of life for the person for whom the facilities or activities are primarily
intended". Secondly, the club must demonstrate that if provides a "public benefit".
Guidance on this aspect is still being developed: in essence you will need to show that
your activities or facilities are generally available to the public without being unduly
restrictive.
Charitable registration requires the club and its officers to comply at all times with
charity regulations, including the annual provision of a trustees report and accounts
(in a prescribed format), and be open for periodic inspection by the regulator. A
major part of the regulator's role is to ensure public confidence and trust in all
charitable activities.
De-registration as a charity is a difficult step, so registration should not be undertaken
likely. Whilst several sports clubs are now applying for registration, the benefits are
likely to be more attractive to the larger or wealthier clubs. An alternative and easier
route for smaller clubs is registration with the Community Amateur Sports Club
scheme, described below. CASC clubs are prohibited from applying for parallel
charitable status.
Further information on charitable registration and the new legislation in Scotland,
England and Wales is available on the regulators' websites (see side panel).
Community Amateur Sports Clubs
Community Amateur Sports Clubs (CASC's) can now apply to be registered with the
Inland Revenue to claim tax relief. This will offer them the support and recognition
they have long deserved. The new tax package is available to all CASC’s in the
country and ensures that community sport is given the best possible chance to
nurture and enhance local sports people. Any club which registers will enjoy each of
the following:
80% mandatory rates relief
Fundraising income up to £15,000 exempt from tax
Income from interest exempt from tax
No corporation tax on trading income under £30,000 per year
Profits from rental income exempt from tax up to £20,000 per year
Disposals assets exempt from capital gains tax
Gift aid on individual donations
Inheritance tax relief on gifts
Gifts of assets on no-gain, no-loss basis for capital gains
Business relief on gifts of trading stock
There is a dedicated CASC information website and the Inland Revenue has published
detailed guidance on CASCs (see See Also panel). In general, for a club to become
registered as a CASC, it demonstrate that it:
is open to the whole community without discrimination
is organised on an amateur basis; and
provides facilities for, and promotes participation in, an eligible sport
Applications for registration as a CASC should be sent to:
Sports Clubs Unit, Inland Revenue, Meldrum House, 15 Drumsheugh Gardens,
Edinburgh EH3 7UN
Business partnership
We've recently come across some sports organisations that are registered as Business
Partnerships. This enables the founders and members to establish and run the
organisation as a legal partnership, creating a defined legal entity with themselves as
the constituent partners. The organisation has limited liability partnership status
(similar to limited companies). Some partnerships then provide payment to their
officers. The partnership can register for VAT and operate as a business employing
other staff and devising appropriate policies for the sports activities.