This article appeared in the December 2016 issue of Club Life.
In my view, even if a club is not specifically looking at an amalgamation it is important for all clubs to understand what an amalgamation is, the processes behind an amalgamation and the benefits to be derived from being prepared.
Clubs have to be strategic nowadays about amalgamation opportunities. Unfortunately, the time when all clubs could find an amalgamation partner is over. We often see clubs in trouble hanging on for too long and this can make them a much less viable amalgamation proposal. The amalgamation process can be quite lengthy, often taking 12 months. So clubs need to keep this in mind when considering an amalgamation.
All clubs should keep the possibility of an amalgamation on the agenda whether your club is to be the continuing club or the dissolving club in the process. It is good governance and practise for clubs to regularly review their options when it comes to amalgamation opportunities. This can be achieved by having a regular item in the agenda of each monthly board meeting dealing with amalgamation, even if there is no current proposal to move that way.
Boards and management of clubs should devote some time to clarify and then document what the club wants to achieve out of an amalgamation. This process will allow a club to identify those very important areas that may or may not be negotiable in any amalgamation. For example:
– maintaining a certain sporting facility;
– minimum period of ongoing trading regardless of financial performance;
– maintaining various sporting sub clubs; or
– representation on the board.
A club may want to identify what sort of club it would consider amalgamating with based on such things as location, size and the objects and ethos of the club. It could get some legal advice on the amalgamation process and issues such as poker machine entitlements and options for advancing funds to the club so it can continue to trade during the amalgamation process. It could get some accounting advice on possible tax consequences.
Clubs facing financial difficulties or just concerned about the long-term viability of the club should also go through a similar process.
The membership could also be consulted early on to see what members consider important and what sort of amalgamation they would support, because at the end of the day member approval is required under the Registered Clubs Act.
It really is a question of planning and being prepared if an amalgamation opportunity does arise – keeping in mind the 5 P’s principle: preparation and planning prevent poor performance.
Having done your homework on amalgamations and identifying the issues that are important to your club will put the club in a much better position to move on an amalgamation proposal if one does arise.
Like any other aspect in commercial life, a good amalgamation comes down to good decision-making. Good decision-making does not happen by chance. A good decision is one that can stand up to later scrutiny. Clubs should implement systems that create an environment that allows for good decision-making.
A good decision is usually one based on a proper understanding of the subject matter after considering all relevant information. Directors should ensure management has given them the relevant information and ask questions or seek further information if they are unsure about a particular position before committing the club to a decision.
Clubs in financial distress may need to take urgent advice as to whether or not the club is insolvent. Directors have a duty to avoid trading while the club is insolvent and can face personal liability in these circumstances.
Directors have a responsibility to assess current and long-term trading issues. If the assessment is that the only viable option is amalgamation with a larger financially stronger club, it is better to seek expressions of interest sooner rather than later. The club concerned will then be in a better position to negotiate the terms of the amalgamation.
Sometimes this may involve having to make a difficult decision and put aside any local issues of animosity or perceived jealously. Directors must consider first and foremost what is best for the club and the local community.
For more information contact Bruce Gotterson on b.gotterson@pigott.com.au
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.