Association bylaws: form an association

Every year, hundreds of new associations are formed in Denmark, sports clubs, residents' associations, cultural associations, professional organisations and interest groups. The voluntary association sector is the backbone of Danish civil society.

But for an association to function, receive grants, open a bank account and act legally, it must have bylaws. The bylaws are the association's constitution: they establish the purpose, structure, decision procedures and financial framework. This guide explains what good association bylaws must contain.

What is an association?

An association is a grouping of two or more people who have come together for a common, typically non-commercial purpose. An association:

• Is a separate legal person (can enter into agreements, sue and be sued)
• Is owned by its members (not by individuals)
• Is run by an elected board
• Does not aim to create a profit for the members (unlike companies)

Types of association

• Sports associations: football clubs, handball clubs, swimming clubs
• Cultural associations: music associations, art associations, theatre groups
• Charitable associations: charities, support associations
• Professional associations: interest organisations and professional groupings
• Residents' and local associations: road associations, homeowners' associations, residents' associations
• Hobby associations: collectors' clubs, gaming associations and the like

The association's legal status

An ordinary association is an unregistered legal person in Danish law (unlike an ApS and A/S, which are registered legal persons). There is no single "associations act"; associations are governed by their own bylaws and by general association-law principles. Associations do not have to be registered with the Danish Business Authority, but can choose to be.

Note, however: commercial associations and certain foundations have special registration and accounting requirements. And associations that apply for grants under the Adult Education Act (folkeoplysningsloven) must, among other things, have bylaws and an adult-education activity.

A CVR number for the association

An association can, and often should, register with a CVR number at the Danish Business Authority. This requires:

• Bylaws
• An elected board
• A name and a home municipality

The CVR number is in practice necessary to open a bank account, employ people and receive grants.

What must association bylaws contain?

1. The association's name and home

State the official name and the municipality in which the association is based. The address is typically the chair's address or the address of a fixed meeting place.

2. Purpose

The purpose clause is the association's most important provision, it establishes what the association exists for.

A good purpose is:

• Clear and defined: What does the association do?
• Not too narrow: Leaves room to develop the activities
• Not too broad: The association's activities must reflect the purpose

Example: "The purpose of the association is to promote interest in chess in [town], especially among young people, and to hold tournaments and teaching."

For grants: The Adult Education Act presupposes, among other things, that associations are democratically structured, open to all and primarily based on voluntary effort.

3. Membership, admission, rights and exclusion

• Admission conditions: Is the association open to all, or are there criteria?
• Membership fee: Normally set by the general meeting, not in the bylaws themselves
• Voting rights: Who has the vote (for example adult members who have paid the fee)?
• Exclusion: In what circumstances can a member be excluded, and what is the procedure?

4. The general meeting

The general meeting is the association's supreme authority. The bylaws should state:

• Frequency: an ordinary general meeting at least once a year
• Notice period: typically at least 14 days in advance (in writing, by email or by notice)
• Agenda: What must always be dealt with? (Chair's report, accounts, budget, membership fee, election to the board, submitted proposals)
• Deadlines for proposals: When must proposals for the agenda be submitted?
• Voting rules: simple majority, show of hands or written vote
• Extraordinary general meeting: In what circumstances, and who can convene one?

5. The board

• The number of board members: for example "The board consists of 5 to 7 members"
• Term: typically 1 to 2 years, with the possibility of re-election
• Election procedure: Who elects the chair, the general meeting or the board internally?
• Powers: What does the board decide (day-to-day management versus strategic decisions)?
• Authority to bind: Who can bind the association legally? (Typically "the chair and treasurer jointly")
• Board meetings: frequency and quorum

6. Finances and accounts

• The financial year (typically the calendar year)
• Requirements for the presentation of accounts
• Audit: internal treasurer control, an elected auditor or a registered auditor?
• Liability: the association is liable with its assets, not the board members personally (unless they have acted in a manner giving rise to liability)
• Handling of the assets on dissolution

7. Amendments to the bylaws

State what is required to amend the bylaws:

• Typically a qualified majority (for example 2/3 of those present with the right to vote)
• A requirement that amendments are announced in the notice
• Possibly a requirement of two general meetings (in some associations)

8. Dissolution

• The requirement for a decision on dissolution (typically a 2/3 or 3/4 majority)
• What happens to the association's assets on dissolution?
• For charitable associations: the assets must go to a similar charitable purpose, not be paid out to the members

This provision is crucial to preserving the association's tax status as charitable.

The Adult Education Act and grants

Associations that apply for municipal grants under the Adult Education Act must meet a number of requirements for bylaws and organisation:

• Democratic structure: the general meeting as the supreme authority, an elected board
• Openness: all interested people can apply for admission
• Voluntary participation: not commercial
• Activities for children and young people (for children's and youth grants)

Many municipalities have specific requirements for the content of the bylaws in order to approve an association under the Adult Education Act. Check your municipality's guidelines.

The requirements of DIF and the specialist federations

Associations that want to affiliate with the Danish Sports Confederation (DIF) or a specialist federation (for example DBU or Håndbold Danmark) must typically meet the federation's own bylaw requirements:

• The bylaws must be approved by the specialist federation
• Specific wording on democratic structure and anti-doping
• A requirement of insurance for participants

Always check your specialist federation's requirements before you draw up the bylaws.

Board liability

Board members in associations are not personally liable for the association's debt by virtue of the board position alone. But they can incur personal liability through:

• Conduct giving rise to liability
• Unlawful transactions
• Continuing activities despite insolvency

It is good practice for the association to take out board liability insurance.

The association's bank account

An association should always have a separate bank account in the association's name. This requires:

• A CVR number
• Bylaws (the bank requires a copy)
• Documentation of who binds the association

Avoid using private accounts for the association's funds, it creates a lack of clarity and can lead to tax problems.

Frequently asked questions about association bylaws

Must association bylaws be registered?

No, bylaws do not have to be registered in the land register. But the association should register with a CVR number. Certain associations (foundations, commercial associations) have separate registration requirements.

Can we form an association with just two people?

Yes. An association requires at least two founders. But the larger the association, the better the foundation, and it is recommended to have a board of at least three people.

What does it cost to form an association?

The formation itself is free. Registration of a CVR number is free. Any costs for a bylaw template, an auditor and running the association come on top.

Can we amend the bylaws?

Yes, with the majority that the bylaws themselves prescribe for amendments (typically 2/3). Remember to keep all versions of the bylaws with a date.

Is the association liable for the board's actions?

Yes, the association is liable as a legal person for the obligations the board lawfully enters into on the association's behalf. Unlawful or negligent actions can give rise to personal liability for the board members.

When must the association have an auditor?

There is no general statutory audit requirement for ordinary private associations. But many municipalities require auditor-approved accounts for grant-receiving associations, and large associations with employees and turnover should have an external audit.

Checklist: what must the bylaws contain?

• The association's name and home
• Purpose
• Admission conditions and membership
• Membership fee (the process for setting it)
• The general meeting (time, notice, agenda, voting rules)
• Extraordinary general meeting
• The board (composition, term, powers)
• Authority to bind
• Finances and accounts
• Audit
• Rules for amending the bylaws
• A dissolution provision (including the disposal of the assets)

Conclusion

Good association bylaws are the foundation of a well-functioning association. They create clarity about decision procedures, prevent internal disputes and are a precondition for grants and banking relationships. Use a professional template as a starting point, and adapt it to your specific purpose and activities.

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The content of this article is for guidance only and does not constitute legal advice. Contact a lawyer or an association consultant for advice on forming your specific association or on the grant rules.