2022 Colorado Code
Title 7 - Corporations and Associations
Article 30 - Uniform Unincorporated Nonprofit Association Act
§ 7-30-101. Definitions

In this article:

1. "Member" means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association or who is considered to be a member by such person and the nonprofit association.
2. "Nonprofit association" means an unincorporated organization consisting of two or more members joined by mutual consent for a common, lawful, nonprofit purpose. However, joint tenancy or tenancy in common does not by itself establish a nonprofit association, even if the co-owners share use of the property for a nonprofit purpose. "Nonprofit association" includes an acequia ditch association, whether or not the acequia ditch association is formed as an acequia ditch association as contemplated by section 7-42-101.5 (3) or is a ditch association operating as an acequia ditch association as contemplated by section 7-42-101.5 (3).
3. and (4) Repealed.

Source: L. 94: Entire article added, p. 1271, § 1, effective May 22. L. 2003: (3)(b) and (4)(b) added by revision, pp. 2356, 2357, §§ 347, 348. L. 2013: (2) amended, (HB 13-1168), ch. 87, p. 280, § 2, effective August 7.

Editor's note: Subsections (3)(b) and (4)(b) provided for the repeal of subsections (3) and (4) respectively, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)

Cross references: For additional definitions applicable to this article, see § 7-90-102.

1. With respect to relations external to a nonprofit association, whether a person is a member of the organization determines principally a member's responsibility to third parties. Internally, whether a person is a member might determine specified rights and responsibilities, including access to facilities, voting, and obligation to pay dues. This Act is concerned only with determining whether a person is a member for purposes of external relations, such as liability to third parties on a contract of the nonprofit association. Therefore, "member" is defined in terms appropriate to these purposes. "Member" includes a person who has sufficient right to participate in the affairs of a nonprofit association so that under common law the person would be considered a co-principal and so liable for contract and tort obligations of the nonprofit association.

The definition may reach somewhat beyond decisions of some courts. Either participation in the selection of the leadership or in the development of policy is enough. Both are not required. This broad definition of member ensures that the insulation from liability is provided in all cases in which the common law might have imposed liability on a person, simply because the person was a member.

2. A fundraising device commonly used by many nonprofit associations is the membership drive. In most cases the contributors are not members for purposes of this Act. They are not authorized to "participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy." Simply because an association calls a person a member does not make the person a member under this Act.

Section 6 (numbered as section 7-30-106 in C.R.S.) nevertheless protects "a person considered to be a member by a nonprofit association" even though the person is not within the definition of member in paragraph (subsection) (1).

3. The role of a member in the affairs of an association is described as "may participate in the selection" instead of "may select or elect" the governing board and officers and "may participate ... in the development of policy" instead of "may determine" policy. This accommodates the Act to a great variation in practices and organizational structures. For example, some nonprofit associations permit the president or chair to name some members of the governing board, such as by naming the chairs of principal committees who are designated ex officio members of the governing board. Similarly, the role in determination of policy is described in general terms. "Persons authorized to manage the affairs of the association" is used in the definition instead of president, executive director, officer, member of governing board, and the like. Given the wide variety of organizational structures of nonprofit association to which this Act applies and the informality of some of them the more generic term is more appropriate.

4. "Person" instead of individual is used to make it clear that associations covered by this Act may have individuals, corporations, and other legal entities as members. Unincorporated, nonprofit trade associations, for example, commonly have corporations as members. Some national and regional associations of local government officials and agencies have governmental units or agencies as members.

5. Paragraph (Subsection) (2) defines "nonprofit association." The model American Bar Association acts deal with both for-profit and nonprofit corporations. Unincorporated, for-profit organizations are largely covered by the uniform partnership acts. The differences between for-profit and nonprofit, unincorporated organizations are so significant that it would be impractical to cover both in a single act. Therefore, this Act deals only with nonprofit organizations.

6. The term "nonprofit association" is used instead of "association" for several reasons. The risk that this Act when placed in a state's code would be construed to apply to both nonprofit and for-profit associations should thus be avoided. Acts dealing with one kind of association when placed in a code have sometimes lost their identification and been inadvertently applied to the other kind where the term "association" alone was used. For example, the New York Joint-Stock Association Act of 1894 used the term "association," which it defined to include only for-profit organizations. "Association" was held in 1938 to include an unincorporated political party and the act applied to it. Democratic Organization of Richmond County v. Democratic Organization of Richmond County , 1 N.Y.S.2d 349 (1938). Subsequent decisions applied the act to other unincorporated, nonprofit organizations. The use of "nonprofit association" instead of merely "association" should also avoid the risk of this Act being improperly used to develop a common law rule by analogy from this Act to apply in a case involving a for-profit association. Roscoe Pound, Common Law and Legislation , 21 Harv. L. Rev. 383 (1908); Robert F. Williams, Statutes as Sources of Law Beyond their Terms in Common Law Cases , 50 Geo. Wash. L. Rev. 554 (1982).

Legal issues concerning unincorporated, for-profit associations that are not partnerships and so not controlled by a partnership act would be governed by a state's other statutory or common law. Resort to one of the two partnership acts for the purposes of developing a common law rule by analogy would be appropriate. Resort for this purpose to this Act in the case of an unincorporated, for-profit association would not be appropriate.

7. Two or more persons is the common statutory requirement to constitute an unincorporated, nonprofit association. New Jersey, on the other hand, requires that there be seven or more members to be an association under its laws. This Act suggests the smaller number -- two. Consideration was given to specifying "one" instead of "two." For example, the developer of a condominium may have created a condominium association as an unincorporated nonprofit association. Before any units are sold the developer as owner of all units has all of the memberships in the association. Should it be treated as a nonprofit association under this Act from the beginning? It should not. Can one person be "joined by mutual consent for a common purpose?" To ask the question would seem to be to answer it. If the concern is to give the developer the entity protections provided by this Act, it is very likely that it already has some protection because it is a business corporation. Nevertheless, the number is placed in brackets, in part, to raise the question whether the number should be one or two or even a larger number.

The members must be joined together for a common purpose. Several states provide that they be "joined together for a stated common purpose" (emphasis added). Because of the informality of many ad hoc associations, it is prudent not to impose the requirement that the common purpose be "stated." Very probably, it is the small, informal, ad hoc associations and those third parties affected by them that most need this Act.

8. "Nonprofit" is not defined. A common definition -- it is an association whose net gains do not inure to the benefit of its members and which makes no distribution to its members, except on dissolution -- does not work for all nonprofit associations. Consumer cooperatives, for example, make distributions to their members; but they are not for-profit organizations. Those consumer cooperatives not organized under specific state or federal laws need the benefits of this Act.

It is instructive to note that the drafting committee for the ABA Model Nonprofit Corporation Act finally determined that it could not develop a satisfactory definition of nonprofit.

9. The final sentence of paragraph (subsection) (2) is adapted from Section 201(d)(1) of Revised Uniform Partnership Act (RUPA). This stresses that more than common ownership and use is required. For example, that three families own a lake cottage and share its use does not make the three families a nonprofit association. Paragraph (Subsection) (2) precludes arrangements that are merely common ownership from being a nonprofit association under this Act.

10. The definition of "person" in paragraph (subsection) (3) is a standard NCCUSL definition.

11. The definition of "state" in paragraph (subsection) (4) is a standard NCCUSL definition.