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The following Article is from Bruce Gotterson’s regular article in Club Life

Changes to a Club’s Constitution

It’s summer, the Beach, BBQ’s, the cricket – a time to reflect and an opportunity to re-enforce our knowledge of the basic concepts. There are plenty of those but for me one of the most important is, “how does the Club legally and effectively change its Constitution”.

Let’s assume the Club’s Constitution says that the Board is elected every year and the Board wants to change this so the Board is elected every 2 years. Do the members have to be advised of and approve the proposed change? If they do what do they have to be sent and how are they to be advised? If members have to first approve the change is there a necessary majority needed to approve the change?

All registered clubs are either companies under the Corporations Act (probably over 95% of registered Clubs are companies) or co-operatives under the Co-operatives Act. This column will deal with companies although the general principles apply to co-operatives.

Do members have to be advised of the proposed change?

Yes. As the club is a company it is subject to the provisions of the Corporations Act.

Section 136 (2) of the Corporations Act provides that a company may modify or repeal its Constitution or a provision in its Constitution by special resolution.

The term special resolution is defined in section 9 of the Corporations Act as meaning:

In relation to a company a resolution:

(a)           of which notice as set out in paragraph 249L(1)(c) has been given; and

(b)           that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution.

The special resolution has to be passed at a general meeting of members.

What has to be sent to members and how are members advised?

A special resolution can only be passed at a general meeting of members.

Members have to be sent a notice of meeting.

Under section 249 L (1) the notice must contain certain things including;

–      the time date and place of the meeting;

–      it must state the general nature of the business of the meeting; and

–      most importantly if a special resolution is to be proposed the notice must set out an intention to propose the special resolution and it must state the resolution.

 

Under section 249J of the Corporations Act members who are eligible to attend and vote on the special resolution are to be given notice of the meeting individually either by hand or by post or electronically that is by fax or email but only if the member concerned has given his or her consent to receiving notice in this way.

Under section 249 H members have to be given at least 21 days notice of the meeting. It is best to allow at least 25 days between posting the notice and the day of the meeting to allow for postage and to make sure there is 21 days counting from the day after the notice would have been received in the post up to and including the day before the day of the meeting.

Can the special resolution be passed at an Annual General Meeting?

Yes provided the matters set out above are addressed.

What is the majority required?

In order for the special resolution to be passed it must be approved by at least 75% of those members who are eligible to vote who attend and vote at the meeting. So for example if 110 members attend the meeting and 99 vote and 11 do not vote then at least 75 out of the 99 must vote for the special resolution for it to be passed. The 11 who did not vote are not counted when working out the 75% majority. If 59 attended and voted then at least 45 would need to vote in favour of the special resolution. For co-operatives the majority required is 66%. Also the change does not take effect until it is registered by the Registry of Co-operatives.

Does the proposed change have to be spelt out and does an explanation have to be given?

Yes. The precise text of the proposed change has to be clearly set out in the special resolution. If one rule is to be deleted and replaced then this has to be clearly set out and the full text of the proposed new rule has to be set out. An explanation of the proposed change must also be included so that members can clearly understand the nature and the effect of the proposed change. Theses issues are very important and clubs should seek legal advice on the content of the notice particularly the wording of the proposed special resolution and the explanation to go with it.

For advice on changing your clubs Constitution please contact Bruce Gotterson at 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.