Club Constitution

I am engaged in applying for a Covid 19 grant for our Club. I have been told that they require Dissolution and Asset Lock in our constitution. We don't have a mention of this. Can anybody advise me as to what their club has in their constitution or correct wording .

Thanks

Brian

Current policy is the 99 caveats system so be careful before you receive money because you may be signing an agreement to repay it if one of the 99 caveats is breached

Edited By JasonB on 10/04/2021 12:19:33

Do you have any lawyers among (or married to) your members?

Have you considered becoming a CIO? There's lots of information on the Charity Commission web-site including specimen constitutions

Lots of Clubs have become Charities.

MC

Our club constitution follows the Queensland Government's model rules for incorporated associations. They are provided free on the Govt website. The clause relevant to dissolution or winding up of an association requires that any surplus assets remaining after winding up must not be distributed among the members but must be given to another association that his similar objects to the association being wound up and that has similar requirements in their own constitution.

I'm sure there would be something similar in UK legislation for community organisations.

As far as I know there are no formal laws in the UK controlling how a purely private club receiving no financial help from taxes or other external revenue, may be wound up.

However it is normal for a club to state that on dissolution any remaining assets shall be applied to the hobby, for example by donations to neighbouring clubs, or to charity.

The principle is that no members may gain financially. If the dying club sells its equipment to individuals, the cash raised should still be accounted for, and after settling outstanding invoices & debts, applied to or towards the club's interest generally.

I have never heard of an "asset lock" and it may something invented by the Covid legislation. Otherwise, a society should have a Dissolution rule, most do, and it is generally pretty much as Perko describes.

Brian -

I would suggest that your society adopts a Dissolution Clause similar to Perko's example; but establish exactly what "Asset Lock" means. What he quotes is near enough verbatim as in clubs to which I belong, but all those preface that with a club lifetime rule to prevent private gains while it exists.

I suggest you propose something like this, which I copied from the Wessex Cave Club, but it's pretty well standard. Replace the xxxx part (hobby-specific) with, e.g., " model- and associated amateur engineering " :

5.3.No part of the Club's funds shall at any time be distributed by gift, division or bonus in money, to or between any of its members.

5.4.On dissolution, surplus funds shall be applied in or towards the advancement of xxxxxx, or any of them.

5.5.No person or Committee shall have the authority to pledge any future income of the Club unless it has been authorised by a general meeting of the Club

How you do it depends how your Club operates, but as matter of principle such a rule is normally a General Meeting matter, and all members need be appraised of the proposal in the due notice period given by your club rules. A physical General Meeting is not presently possible, and you may need consider members who are not on the Internet let alone use Zoom. So, if pressed for time you might circulate everyone with the Proposal (signed, the Committee) and a postal ballot form - Yes, No, Abstain.

'

Regarding charities, I am very dubious about that route. On or two of my clubs are PLCs, having to file annual Returns to Companies House. I do not know what if any advantage there is in being a charity - commonality of practice is not recommendation, and free lunches do not exist. Don't think of the present, but of future, hazards.

The following illustrates that general point about unintended consequences, although the specific example is not likely to cover model-engineering societies.

My other caving-club had been enticed by promised tax advantages into becoming an HMRC-registered "Community Assisted Sports Club". This mainly meant membership open to all having that particular interest - as ours already was. HMRC waited a year, then pounced. It gave every CASC a narrow escape-period after which it CASC status would be irreversible and enforce internal record-keeping designed to prevent fraud, but impracticable and intrusive at the level required. With that, and no guarantee of no further regulation, a General Meeting voted our escape.

'

Over the years I have seen a number of clubs consider incorporating. One that I belong to studied the fors and againsts in great depth and decided against.Those in favour put forward the idea of paying a pound and if Joe public sue after an accident, they may get an insurance payout but the club insurers would employ a clever lawyer to get around the scheme. Wind up club to avoid that and they are likely to make the committee, aka directors personally liable and subject to bankruptcy proceedings. Nothing would be gained and incur considerable unnecessary costs complying with company law.Nothing tested in the courts yet and with HMRC intrusion and costs involving accountant and lawyer, that club decided it was best to stay as they are. A large national club is incorporated with all the costs and general aggro, is it worth it?I think not. One local club went Ltd and incurs annual accounting fees of some hundreds of pounds. I belong to two local private ME clubs who get along fine without external intervention and in both cases, all committee members are honorary and stay on the committee for as long as they and the general membership wish. I have no knowledge or experience of charitable status which was also considered but I think that again there would be some considerable unwanted external interferance in the affairs of a club which exists to support the hobby.

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I think the important thing is what Brian has been told by the grantor ...

[quote] I am engaged in applying for a Covid 19 grant for our Club. I have been told that they require Dissolution and Asset Lock in our constitution. [/quote]

[my emboldening]

... effectively it’s a contractual term of the Grant, rather than any general legal obligation.

MichaelG.

You can see their point though, without that kind of safeguard a Club could get the grant and immdiately wind up, distributing the money between the members, or to the Committee or whatever they have written into their Constitution. Sadly there are people who would do that.

Rob

An Asset Lock is simply a term in your constitution that specifies what will happen to the assets of your organisation in the event it is wound up. Depending on whether you are a charity, CIC, standard limited company or a private member's organisation, you may already have some language around this. If you do, all you really need to do is make it clear exactly how assets would be disposed of: the "lock" means that the receiving organisation must carry on similar aims to your own organisation. No specific wording is necessary, just clear plain English!

There seems to be several Covid grants available, can you please say which grant you're applying for? Thanks

It is a Community Foundation Grant, called an Emergency/Recovery Grant.

Brian

Grindstone -

Yes, that would be one of the things the grants people have in mind. The fraud in the CASC case is somewhat different - the supposed club not being active, but little more than watching the football on the pub telly.

It's also safeguarding the bona-fide members' interests.