The association is a popular legal form for groups of people who are engaged in an activity together. It could be anything. A football association, a music association, scouting or a political party. At an association, the members have a lot of influence on policy. In the General Members Meeting they can agree to proposals from the board. It is quite easy to set up an association. A lot has been regulated by law for the way in which the board and the members should treat each other. These statutory regulations are not binding, but deviations from them must be recorded in the articles of association.
Characteristics of an association
An association has three characteristics. The most striking - and also the biggest difference with a foundation - is that an association has members. They feel connected by a common goal. A second characteristic is that the directors are protected by an association. Creditors cannot recover their debts from the private assets of the directors, at least if they have done their job well. The last important feature is that an association may not distribute profits among the members or other persons involved in the association. The profit may only be used to realize the purpose of the association.
Three types of associations
Not all associations behave in the same way and treat their members in the same way. Sports clubs, social clubs and trade unions have a very intensive relationship with the members. They are very closely involved in club life. At associations such as Natuurmonumenten and the Red Cross, this relationship is much less. For most members, membership means nothing more than paying their dues on time. In the third type of associations, the main aim is to stimulate commercial goals. Think of an association of shops.
Founding an association
Just like a foundation, establishing an association is an official matter. This is done on the basis of a notarial deed. That is required by law. That deed must state what the name and purpose are. It also describes in detail the role of the General Members Meeting. It states, for example, how the meeting is convened, how directors are appointed and dismissed and what will happen to the assets of the association if it were to be dissolved in the future.
A second obligation when setting up an association is registration with the Chamber of Commerce in the Trade Register. Failure to do so or forgetting to submit the articles of association can have unpleasant consequences for the directors. Because in that case the protection against liability will lapse. The consequence is that each director is then jointly and severally liable for the activities he has developed at the association. Creditors can then first use the assets of the association and then the private assets of the directors to collect their debts.
There is a much easier way to set up an association than through a notary. This is an association with limited legal capacity, or an informal association. It is established without a notarial deed. An informal association does not have to be registered in the trade register at the Chamber of Commerce, but it is recommended. Because directors of an informal association are jointly and severally liable for any debts. This risk is limited by registering with the Chamber of Commerce. Because then the creditors must demonstrate that there is a good chance that the association will not be able to meet its obligations.
The statutes stipulate how the association will be managed. It is a formal document that must be approved by the notary. Unless otherwise stated in the articles of association, these can only be amended after the intervention of a judge or by the members during the General Members Meeting. In addition to the details of the founders and the purpose of the association, the articles of association also describe the procedures for hiring and firing directors and members. Another part is a description of the way in which the decision-making process takes place. The statutes also stipulate where the money will go when the foundation is dissolved.
The articles of association as outlined here are legal outlines. Associations have a great deal of freedom to adjust their statutes as they see fit. It regularly happens that other agreements are made, in particular regarding the division of powers between the board and the General Members Meeting. It is good to take this into account in conflicts. It may well be that a different solution can be found on the basis of the association's own statutes than on the basis of the general legal guidelines for associations.
The members of an association
The articles of association of most associations contain procedures about how new members are accepted. If those procedures are not in place, the board will decide. However, the role of the members should not be underestimated. They have the power to appoint or dismiss board members, they can amend the articles of association and they must approve the annual figures. They can even decide to dissolve the association. This happens during the General Members Meeting. For most decisions, a majority of 50% or sometimes even two-thirds of the members must support the decision.
Terminate membership of members
In the vast majority of cases, a member's membership is terminated at the initiative of the person concerned. If a member dies, membership of the association is automatically terminated. But the board can also decide to remove someone's membership. This can be done in two ways. If a member no longer meets the requirements for membership in the statutes, membership can be terminated. Usually there is still a notice period.
A heavier measure is disqualification from membership. This is the case if a member acts contrary to the statutes or regulations and thereby damages the association. Disqualification is applied if a member has seriously harmed the association by his actions. Deportation is done on the initiative of the board. This means that the member immediately no longer has access to the association. He can still appeal against this in the General Members Meeting, but it only meets a few times a year.
Dissolve an association
In principle, an association can be dissolved by two bodies: the General Members Meeting and the court. A proposal to dissolve the association can only be handled successfully if it is announced in advance in the agenda of the General Members Meeting. A majority of two-thirds of the votes is required for dissolution. Other reasons for closing a foundation have to do with violations of the applicable norms and values. This may be the case if the goals of the association are inconsistent with morality or public order. This can lead to a ban and then the judge will dissolve the association.
The organization of small associations
However small an association may be; there are always at least two bodies that deal with the ins and outs of the organization: the board and the General Members Meeting. Most of the powers lie with the General Members Meeting. That is determined by law. In addition, all kinds of other bodies can be established, such as a bar committee or a supervisory board. These new committees must be recorded in the articles of association.
The board has the task of implementing the day-to-day policy and representing the association externally. Once a year, the board is accountable for this to the General Members Meeting. The annual report, which accounts for this, must be signed by all board members and committee members. If no auditor's report is issued and if the association has no supervisory directors, an audit committee must be appointed. It consists of two members who are not on the board. The audit committee checks the balance sheet and the profit and loss account in the annual report and reports on this during the General Members Meeting.
Powers of the General Members Meeting
Appointment, suspension and dismissal of directors is one of the most important powers of the General Members Meeting. Other important decisions that are taken are the amendment of the articles of association and the adoption of the annual accounts. The General Members Meeting may also take decisions for situations not provided for by law or the articles of association. Resolutions that are contrary to the articles of association or regulations can be declared null and void. This is done by a judge. Decisions can only be taken by the General Members Meeting if a prescribed proportion of the voting members are present.
As a director of associations with full legal capacity you are not personally liable, unless you are responsible for the occurrence of debts due to mismanagement. As directors of an association with limited legal capacity, you are personally liable. This can be limited by registering the association with the Chamber of Commerce. Because you are not employed as a director of an association, you do not pay any income tax, which means that you are not entitled to social insurance. It may be wise to arrange disability insurance yourself.
Difference between a foundation and an association
An association and a foundation are very similar. The difference that is most striking is that an association has members and a foundation does not. However, there are more differences. It is wise to thoroughly investigate which legal form is most suitable for your organization. Before you know it, you are breaking the law without realizing it. Then it is a complicated and expensive matter to have your association converted into a foundation or vice versa afterwards. That is why we list the most important differences point by point here.
- A foundation must comply with a different part of the civil code than an association.
- A foundation can only be set up through a notary and must be registered with the Chamber of Commerce. An association can choose whether they want to. If a notary is used, a formal association is created.
- Liability with an association and a foundation is different for the directors.
- A foundation and a formal association can inherit, own land and buildings. An association that is not formal is not allowed.
- It is legally regulated that an association has members and a foundation does not.
- Foundation directors are elected by the board. Directors of an association are elected by the members.
- The articles of association of a foundation can be changed by the board and by the court. The General Assembly of Members (GMM) is the designated body in a formal association to amend the statutes.
- For a foundation and for some associations, estates are an important source of income. A charitable foundation (ANBI) is exempt from inheritance and gift tax. This also applies to associations that are an institution promoting social interests.
Step-by-step plan to establish an association
If you plan to co-create an organization with other people, there are many things to consider. Here is a simple step-by-step plan to help you with this.
Step 1: Make a plan
A plan for an association or a foundation is very similar to a business plan. In that plan you describe which activities the association wants to develop, what the target group is, what the objectives are and what financial situation is involved. Statutes and internal regulations must also be drawn up. Before you can formally establish the organization, all these documents must be approved by the members. Then you go to the notary for the effective establishment of your organization with full legal capacity.
Step 2: Choose a legal form
First consider whether you want to set up a foundation or an association. Both have their own advantages. Suppose you choose an association. Then remember that at least two people are required to set up an association. Then have the deed approved by the civil-law notary.
Step 3: Register the association with the Chamber of Commerce
An association with full legal capacity must be registered in the Trade Register of the Chamber of Commerce. You must do this immediately, otherwise the founders will be jointly and severally liable for defaults.
Step 4: Balance the budget
A healthy association has a financially sound basis. In an association you are largely dependent on the contribution of the members. It is wise not to depend on that completely. Therefore, look for alternative sources of money, such as grants, sponsorships and funds. You can also improve your financial position by paying close attention to savings on the cost side. Of course you choose a business account that suits the financial position of the association.
Step 5: Provide enough volunteers
The members are the capital of the association. In fact, if properly organized, they can take care of all activities within the association. It is therefore important to recruit new members and keep existing members in. One of the most successful ways to do this is through word of mouth by existing members. Distributing folders around the neighborhood also works well, as does placing calls via social media.