How to limit the liability risk for fan club founders? Time to park the bus!
In times of FIFA World Cup madness, David and Maxime have launched the idea of founding their own fan club named "Nacer '94 - the redeemer", in honour of one of this World Cup’s unsung heroes. They do not lack any ideas for fun activities, but how should their fan club be structured from a legal perspective in order to adequately protect their interests?
The creation of a "de facto association" (feitelijke vereniging/association de fait) is perhaps the most flexible way to structure their fan club. A de facto association is a legally undefined concept and is used as an umbrella name for groups of individuals who pursue a common goal.
No specific formalities must be observed when founding a de facto association (even a tacit agreement would suffice, although for evidentiary reasons this is obviously not recommended). Also, the governance of a de facto association may be freely organised by its members, which increases the need for a written agreement.
The main disadvantage of a de facto association is of course the fact that it has no legal personality. In other words, a de facto association is not a carrier of any rights or obligations. From a legal perspective, all acts will be deemed to be performed by the members of the de facto association. Consequently, the members will be personally held responsible for all liabilities incurred in the context of the activities organised by the de facto association. Indeed, a de facto association cannot initiate legal proceedings, nor can it be the subject of such proceedings.
However, if the founders – following the leading example of José Mourinho – wish to preserve a certain degree of “defensive stability”, it could be considered to structure the fan club as a "non-profit-making association" (NPMA). In contrast to a de facto association, an NPMA has legal personality and can act in its own name and for its own account. An NPMA has an equity capital that is to be clearly distinguished from the personal assets of its members. The individual members are, in principle, not personally liable with their own assets for NPMA’s liabilities. Additionally, the fact that an NPMA cannot be founded tacitly guarantees that its organisation and governance structure are duly considered beforehand.
An NPMA is however subject to specific legal, administrative and tax obligations. It is e.g. legally not allowed to (i) provide capital gains to its members, or (ii) to perform industrial and commercial acts on a regular basis. With regard to the latter, the legislator would provide more flexibility though in the framework of the upcoming major reform of Belgian company and association law.
Depending on the scope and activities of their fan club, we would therefore recommend David and Maxime to structure their fan club as an NPMA, as this would enable them to adequately limit their individual legal liability.