RUNNING AN ANGLING CLUB

Transcription

1 RUNNING AN ANGLING CLUB FACT SHEET NUMBER 3

2 RUNNING AN ANGLING CLUB This fact sheet looks at the organisation of an angling club and problems that can arise for those responsible for managing club affairs. Most clubs run as unincorporated associations, but some run all or part of their operations as limited companies. Whichever model is used, the potential liabilities of directors or officers have to be carefully considered, and the pros and cons of each approach weighed. Also, the relationship between the company or club and its members has to be regulated. This fact sheet looks at the advantages and disadvantages of running a fishery as an unincorporated association or a company, the liability of officers and directors, and the relationship between the club and its members. 1. UNINCORPORATED ASSOCIATIONS 1.1 Introduction In common parlance the phrase unincorporated association means a club. Clubs are of two sorts. Proprietary clubs are those where the assets of the club are owned by an individual or company. The owners accept members and keep the profits of the business. In the case of members clubs, the assets are owned by the members, and any profits are retained for the benefit of the members. Since virtually all angling clubs are members clubs, this fact sheet only focuses on this type of club. 1.2 Legal Status Unincorporated associations are not recognised at law as a legal personality in the same way as a company or an individual. This means that they are no more than a group of individuals. This has important implications both as to the assets and liabilities of the club. 1.3 Assets and Liabilities So far as assets are concerned, what belongs to the club belongs to the members in equal shares, unless otherwise provided by the rules. All members are therefore entitled to share equally in the assets of the club on its dissolution. Indeed, there may be a danger of individuals seeking to claim shares of surpluses acquired by clubs, e.g. compensation, rather than retaining these sums for the benefit of the club, unless rules prevent this. Liabilities are also equally shared between the members. Thus, if there was a deficiency of assets over liabilities, for example if there were not enough subscriptions to cover rents for fisheries or a legal case was lost resulting in an order for costs, then the members of the club would all be personally liable to satisfy the creditors of the club. Equally, if the club were found liable for damage to a third party, for example for an injury caused by negligence not covered by insurance, this would be a liability of all of the members. Fact Sheet No.3 2

3 This liability is joint and several. This means that each member is wholly liable for the sum claimed and a creditor can therefore seek to recover all that is owed from just one member of the club. If a member were to meet more than his share of liability, then he would be entitled to an indemnity from the other members of the club, but this may not be effective until after the liability has been met. It is important to emphasise that this situation should not occur in a club that is well run, see below, but equally important is to be aware of the risks associated with unincorporated associations when deciding how to run a fishery. 1.4 Liability of Officers and Trustees There are also important issues for officers of angling clubs to be aware of. Because the club has no legal personality, see above, it cannot contract on its own behalf. This is particularly relevant in the case of taking on leases or purchasing land. In order to get round the difficulties of the club not being a legal personality, it is necessary to appoint trustees who are authorised to hold assets on behalf of the club. This situation creates a potential personal liability for the trustees, arising from, for example, non-payment of rent by the club for a fishery, and this needs to be regulated by Club Rules, see below. In order to appoint Trustees, there has to be a Declaration of Trust which appoints the initial Trustees and defines what assets they can hold and the basis on which they do so. Generally, the Trustees will be officers of the club. Whenever there is a change of officers, there has to be a change of trustee, which is dealt with by a Deed of Appointment and Retirement. It is also relevant in the case of issuing proceedings. The courts allow club proceedings to be commenced by named members of the club for and on behalf of all members. Whilst all members are potentially liable for the costs of the litigation, it is possible that the named individuals may attract personal liability. In the above cases it is sensible for the trustees or named individuals to ensure that they have a suitable indemnity from the members of the club so that they can recoup any personal liability they have incurred from the club assets. More generally it is sensible to include a limitation in the club rules both to give officers and trustees an indemnity and protect them from being sued by club members provided that they act within the authority given to them by the club in its constitution. It is also possible to obtain insurance against trustee liability. 1.5 Advantages of Unincorporated Association Despite the issues set out above, there a number of benefits to running a club as an unincorporated association. It avoids the financial and administrative burden of preparing annual accounts and returns for filing at Companies House as well as other Companies Act requirements. It also avoids the initial set up costs of purchasing a company and creating agreements between the company and those who fish the waters. In most cases, the club will remain in existence in some form, and a company format will therefore not be a complete solution. Fact Sheet No.3 3

4 At the end of the day the club format comes much closer to meeting the real object of angling clubs which is for local people to join together to enjoy the use fishing rights that they would not be able to acquire themselves. The club model allows those local people to be involved in the running of the club s affairs and provides a single organisation for dealing with all those affairs. By effective rules and sensible use of insurance, many of the pitfalls set out above can be avoided. 1.6 Avoiding Risks If the club decides to run its affairs as an unincorporated association, then there are a number of steps that can be taken to reduce the risk the problems mentioned above occurring. (a) The rules of the association can be used to prevent moves by members to call for a distribution of assets either on dissolution or earlier. This can be achieved by ensuring that the majority required is sufficiently high to make it unlikely that such a resolution would be passed. Also it is possible to provide that assets should not be distributed to members on dissolution, but should be given to a charity or some other angling body. It is also worth considering protection against moves for rule changes to make distribution of assets easier by again ensuring that a large majority vote is required to make any rule change. (b) The rules of the club should provide as a matter of course that trustees and officers are not liable for actions they take on behalf of the club where that action has been authorised by the club in accordance with its rules. Also the rules should record that the officers and trustees should be indemnified by the club in respect of any personal liability that they incur on the club s behalf. It is sensible to ensure that important decisions of the club that involve a substantial investment or open up the possibility of a future liability are recorded in the minutes as approved by the committee for the protection of the officers and trustees. (c) Where possible potential liabilities to third parties should be protected by insurance. Public liability insurance provides cover for liability to third parties such as members of the public having accidents. Sporting policies are available which offer protection against business interruption. This could cover a range of events that leave a club unable to use its fishery while continuing to have the expense associated with it. 2. LIMITED COMPANIES 2.1 Introduction Limited companies are formed pursuant to the provisions of the Companies Acts. The most important feature of a company is that its liability is limited. Companies can be limited by shares or by guarantee. Generally, in the case of non-profit making companies, the guarantee route is taken. In this case the company has members who each guarantee a nominal sum, usually 1, in the event that the company is wound up. The liability is therefore limited to the assets of the company plus the value of the guarantee. In practice in most cases, the members of the company would be the same individuals as the trustees of an unincorporated association. Fact Sheet No.3 4

5 A company is a legal personality, and can therefore sue and be sued and can also enter into contracts. All companies must have directors who are responsible for running the day to day affairs of the company. The company must also hold an annual general meeting which members may attend. It must file an annual return and annual accounts at Companies House. 2.2 Advantages of a Company There a number of advantages of a company set up. The most obvious is the limitation of liability. This means that an angling organisation can enter into contracts, including leases, without the risk of personal liability. Equally, the company can sue and be sued without individuals putting forward their names and without the assets of individual members being exposed. There is however a practical limit to the use of limited companies to enter into contracts and to sue. For example, in the case of leases of waters with substantial rents, it is likely that the landlord will want to protect against the possibility of the company not having sufficient assets, by requiring individuals to guarantee the obligations of the company, or possibly, requiring a rent deposit to be paid. In the case of litigation being brought by a company, there are some circumstances where the courts will require a company to pay money into court to cover the likely amount of the costs if it considers that the company will not have sufficient assets to meet those costs at the end of the case if it loses. A second advantage is that the company can enter into contracts including leases on its own behalf without having to appoint trustees to do this. Linked to this is the benefit that the limitation of liability enjoyed by the company means that it does not expose the individual members to ultimate unlimited liabilities, in the event that things go wrong. It also reduces the potential exposure of officers who might have personal liability for their actions in a club situation, or who lend their names to actions on behalf of the club. Also, it removes the risk of personal liability of individual members for the debts of an unincorporated association. It is a basic feature of companies that it is not possible to go behind the veil of incorporation, and establish personal liability against individuals who are officers and members of the company except in certain, very specific, circumstances set out in the Companies Acts. Broadly speaking, it requires dishonesty on the part of a company s officer for this to happen. A third practical advantage is that as the company exists for all time it is not necessary to enter into a deed of appointment and retirement as is the case with a change of trustees in an unincorporated association. Linked to this, it avoids the need to transfer registered titles from the old to the new trustees at the Land Registry. 2.3 Disadvantages of Company Framework There are disadvantages to using the company framework. There is an initial cost in acquiring the company and putting in place the necessary documents to regulate the relationship between the company and the club if there continues to be one. The documents governing the way a company is run are known as the Memorandum and Articles of Association. These documents set out the objects and powers of the company, as well as regulating the way it does its business. They can be amended to reflect the particular requirements of the angling organisation involved. Fact Sheet No.3 5

6 There can also be an initial cost in altering the documents of title to the fishing from the names of the club/trustees to that of the company. The overall set up cost could be anything between 500 and 2,000. There is also an ongoing administrative burden in running a company. As indicated above, there is an obligation to file annual returns and accounts at Companies House. Additionally, the company s register has to be kept up to date, showing changes in membership of the company. Changes in director have to be recorded and notified to Companies House. Annual general meetings have to be held. Finally, minutes of the company have to be maintained. To some extent these obligations mirror what happens in a well regulated club. However, the burdens are greater in the case of a company and can involve extra cost, for example, preparing audited accounts for filing at Companies House. A further disadvantage of the company format is the fact that company information has to be filed at Companies House and this information is publicly available. Thus, any member of the public can look at filed accounts, and details of the company s directors and registered office. 2.4 Methods of Operating a Company If it is decided to form a limited company, a further decision has to be made as to whether the former club will be wholly wound up or not. In practice, it is difficult to run the whole of the angling operation within the company format and remain faithful to the basic objective of most clubs namely, the provision of angling for a local community. i.e. an angling club is not first and foremost a business. Therefore there needs to be some machinery whereby members can continue to pay an annual subscription, enjoy their fishing and be involved in the affairs of the club. The unincorporated association is particularly well suited to this objective as all members automatically have an interest in the club. In the case of a company limited by guarantee, it would require every member of the club to become a member of the company. This has administrative implications as a members register would have to be kept up to date. In most cases a company would be formed in order to hold the assets of the club and, perhaps, to make executive decisions as to the direction of the club, but the normal member would continue to gain access to the fishing by paying an annual subscription to the unincorporated association. Thus the club would remain in existence but ownership of assets and some risks would vest in the company. 2.5 Avoiding Risks Broadly speaking, the steps set out under the heading Unincorporated Associations above apply equally to the company format. Obviously one of the main purposes of forming a company is to limit possible personal liability of individual members. However, thought still needs to be given to how to protect against attempts to cash in on the assets of the company and what happens to the assets of the company if it is wound up. Equally, directors of the company need to be sure that they have proper authority to take decisions if some form of club remains in existence and will wish to seek indemnities against personal liabilities. The advice as to proper insurance is just as valid for companies. Fact Sheet No.3 6

7 3. CONCLUSION It has been seen that there are advantages and disadvantages to running a fishery through a company and by an unincorporated association. Even where companies are formed, generally some form of unincorporated association remains in place. As a general rule the company option is likely to be more attractive to larger clubs with substantial assets and potentially greater liabilities, when the cost and administrative burden of running a company will be outweighed by the benefits accruing. Whichever model is used, there are certain practical steps that can be taken to minimise potential liabilities of members and officers of angling organisations. Please note that this fact sheet is intended to give general guidance on the stated area of law We cannot accept any responsibility for the consequences of relying on this fact sheet in relation to particular circumstances of which we are not aware. Should you require more information on any issues raised in this fact sheet or require advice on a specific issue please contact Simon Jackson. Simon Jackson Solicitors Thorpe House, 29 Broad Street, Hereford HR4 9AR The Office, Tyn Celyn, Llansilin, Oswestry SY10 7JW srjackson@hcrlaw.com Simon Jackson Solicitors is a trading name of Harrison Clark Rickerbys Authorised and Regulated by the Solicitors Regulation Authority (SRA) Fact Sheet No.3 7