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Although the concept of an amalgamation may be familiar to many people in the club industry, you may be less familiar with the steps involved unless you have had first-hand experience and involvement in one.

An amalgamation of two registered clubs is one of the most legally and commercially complex matters that a registered club will ever undertake.

Why should clubs consider an amalgamation?

A “proposed dissolving club” may need to consider an amalgamation if it is facing financial difficulties or it has entered into external administration – such as voluntary administration because of imminent insolvency.

However, a “proposed dissolving club” may also be motivated to amalgamate for other reasons. For example, the “proposed dissolving club” may wish to explore its options for growth with a larger club, or it may have identified that a larger club would be better equipped to ensure the long term viability of the club’s premises.

Clearly, a “proposed dissolving club” that has taken proactive steps to amalgamate before facing financial difficulties will be better able to negotiate more favourable amalgamation terms than a club that is already under financial strain or that has entered into external administration.

There are a number of reasons for a “proposed surviving club” to amalgamate. This include, but are not limited to:

      • Diversification into a new market and local community; and
      • A strategic acquisition of a competing club or an underperforming club with significant potential to improve its performance;
      • Commercial benefits such as increased profitability and the acquisition of assets such as land and gaming machine entitlements;
      • Preservation of its long term future (for example, a club which leases its premises may wish to amalgamate with a club which owns its premises in case the lease is not renewed);
      • Preservation of “local community assets” and the services and facilities that clubs provide to the broader community.

There is no restriction on a “proposed surviving club” being proactive and calling for expressions of interest in amalgamation. A benefit of this is that a proactive “surviving club” may receive amalgamation offers from clubs which:

      • have not previously considered an amalgamation; and
      • would not traditionally call for expressions of interest in amalgamation;
      • are unwilling to call for expressions of interest in an amalgamation for whatever reason.

What are the general steps in an amalgamation?

The general steps in an amalgamation are as follows.

For the purposes of this Newsletter, Club A will be the dissolving club in the amalgamation and Club B will be the surviving club in the amalgamation.

      • Club A calls for expressions of interest in amalgamation from other clubs in at least a fifty kilometre radius. This is usually done by way of an advertisement in the ClubsNSW E-Circular.
      • After Club A has called for expressions of interest in amalgamation, other clubs prepare and submit their “amalgamation offers” (ie their expressions of interest) to Club A.
      • After the “closing date” for amalgamation offers, the Board of Club A reviews the amalgamation offers that it has received and then selects its preferred amalgamation partner (Club B).
      • After Club A has selected Club B as its preferred amalgamation partner, the Boards of both clubs will negotiate and execute a legally binding agreement to amalgamate, known as a Memorandum of Understanding (commonly referred to as a MOU). The MOU deals with the legislative requirements for an amalgamation and other important commercial matters regarding the amalgamation.
      • The clubs should undertake due diligence on each other to ensure that the amalgamation will be viable and beneficial to each club respectively.
      • After the MOU has been executed, each club must convene separate general meetings of members to obtain the approval of members (by way of an ordinary resolution) for the proposed amalgamation. This will require a simple majority (50%+1) of members at both of the meetings to vote in favour of the proposed amalgamation.
      • Also, at its general meeting, Club B will need to amend its constitution (by way of special resolution) to establish a class of membership for the members of Club A.
      • After the members of Club A and Club B have approved the amalgamation, an application is made to Liquor & Gaming NSW for formal approval of the amalgamation.
      • After Liquor & Gaming NSW have provisionally approved the amalgamation (and assuming the due diligence is satisfactory), there are a number of commercial matters that the clubs must attend to. These matters include the transfer of Club A’s members, employees, assets (including land/leases) and contracts to Club B. All of those transfers will take effect from the completion date of the amalgamation.
      • When the commercial matters are ready to be completed, the clubs must provide Liquor & Gaming NSW with five (5) business days notice of the proposed completion date of the amalgamation.
      • On the completion date of the amalgamation, Club A’s members, employees, assets, contracts, liquor licence and in many cases, Club A’s liabilities will be formally transferred to Club B and the amalgamation is “completed”. From this date onwards, Club B is responsible for the management and operation of Club A’s premises as well as its own premises.
      • After the amalgamation is completed, the corporate entity of Club A is voluntarily wound up, formally liquidated or otherwise deregistered as a company.

However, in some amalgamations, there may be additional matters which both clubs must attend to.

Next steps

We strongly recommend that you contact us when considering a possible amalgamation because it is essential that clubs obtain advice as early as possible from solicitors with

      • a thorough understanding of the laws regarding club amalgamations; and
      • extensive experience in club amalgamations;
      • a proven track record in club amalgamations.

We can assist you in ensuring that your club’s amalgamation is dealt with in a timely and legally compliant manner with a minimum of fuss and this will significantly reduce the possibility of any costly mistakes or delays occurring in the amalgamation process.

We are a leading firm in club amalgamations and we have undertaken a significantly large number of club amalgamations for more than thirty years.

Further information and contact details

Should you wish to discuss the possibility of am amalgamation or the procedures involved in an amalgamation, please  contact any member of the Clubs team on 8251 777 or by email:

Ray Travers

Bruce Gotterson

John Ralston

Michael McCluskey

Matt Goodwin

 

This article is intended to provide general information in summary form on a legal topic, current at the time of publication.  The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.