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CDI’s latest round of seminars, Legal & Financial Risk Management, explores a range of topical issues currently affecting club directors. Packed with essential information to help navigate yourself successfully around the boardroom table, don’t delay in securing your place today.

The buoyancy of the current market, combined with changing dynamics for the hospitality sector, make thecurrent conditions for the club sector a challenging space for all participants. When you consider that more than half of the clubs around the State are feeling the economic pinch, together with the media’s increased scrutiny of corporate performance via federal politicking over gambling reforms for poker machines, the board’s role in maintaining good governance and responsibility has never been more important.

A club’s board of directors carry ultimate responsibility for all decisions, and are required to fully assess for each matter under consideration their level of involvement, the processes to be followed, and parameters within which management must operate.

Factors influencing the level of control exercised by the board include: The size of the matter relative to the business; whether the opportunity is within a market or industry familiar to the business; and, the experience of the management team in overseeing the issue. A well-balanced board with a range of skills can add significant value to a wide range of matters through its guidance and experience. Those clubs embarking on a diversification program should assess whether they have the required skill and experience on the board to assist with making the necessary decisions, and any skill-gap should be remedied, either through the appointment of external advisers or by a new appointment to the board.

The board also fulfils an important role as the objective counterbalance to the management team who have invested often large amounts of time, effort, and reputation in pursuing a particular matter or business opportunity. Naturally, business opportunities also involve considerable risks, and the board must be confident that each opportunity is demonstrably in the best interests of the club and its membership, and that relevant protections are put in place to identify and address such risks. If you fail to do this, you may as well have your head in the sand.

Increasingly, boards are required to take a more active approach than may previously have been the case in the club industry. However, there is a natural tension between the board becoming too heavily involved, and usurping the role of management, and the desire for the board’s involvement and expertise to be utilised in a constructive manner. Accordingly, good governance requires boards and management to clearly understand their respective roles and (in management’s case) levels of authority. These and many more issues form part of the next round of CDI seminars, titled Legal & Financial Risk Management.

Since last year’s round of CDI seminars with Pigott Stinson there have been a range of changes to legislation which affect registered clubs including the Registered Clubs Act, some of which will be explored in more detail in this round of seminars. There are also some important legal cases that will be discussed as well as a selection of related topics which regularly come up in our practice.

As we did last year, this next round of seminars will be presented in a workshop format which allows for interactive group discussion and participation amongst all the attendees. In doing so, we’ll present a case study and develop a set of facts which will throw up questions along the way. Those attending will be given a legislation booklet along with a case study and question booklet and be asked to read through the material as we go in an attempt to answer the questions we have set. This then allows for good group discussion.

What we also found last year was that both directors and managers attending the seminar found that the open and interactive discussion was a good way to learn new things and/or re-enforce their existing knowledge. We encourage everyone attending to participate but don’t feel under pressure to answer questions. The whole idea of the seminar as far as we’re concerned is for those attending to leave with a greater understanding of their role and responsibility as a director as well as a better comprehension of some of the legal framework
around their role.

So, what are we going to address in Legal & Financial Risk Management? First up are changes to legislation. More specifically, we further investigate the recent changes to the Registered Clubs Act relating to the size of club boards and the regularity of board elections.

Clubs have received a lot of information and been kept up-todate by ClubsNSW circulars on these issues. One issue which appears to be causing some confusion is the legal status of the changes, particularly the two highlighted above. Even though the Registered Clubs Act has been amended with a number of changes including the above two, they won’t commence until regulations are made. At this stage the regulations haven’t been finalised as the New South Wales Government has asked for and been provided with submissions from the industry including of course ClubsNSW as to the various matters.

Boards are required to take a more
active approach however there’s a
natural tension between the board
becoming too heavily involved, and
usurping the role of management, and
the desire for the board’s involvement
to be utilised in a constructive manner.

However, what appears to be clear is that the New South Wales Government wants the industry to move toward reducing board sizes so they will consist of no more than nine directors and move away from annual board elections towards either two-year terms or the Triennial Rule which is a system where a third of the board retire each year and directors are elected for three-year terms. So, those clubs with boards consisting of more than nine directors or which conduct annual elections for the board will need to review their constitutions and seek some legal advice about making some changes.

Another area of legislative change we’ll cover is in the financial reporting to members. The Corporations Act has evolved in this area over the years. Originally, the Act required companies – which include over 95% of clubs – to send to each member each year a copy of the financial report, the directors’ report, and the auditor’s report. The Act was changed to allow clubs to only have to send these documents to those members who indicated that they wanted a copy sent to them but only after the club had sought the members request to, now under Section 316A of the Corporations Act, whereby members have to request in writing for copies to be sent to them either in the post or if they prefer via email.

Clubs have welcomed these changes as they’ve allowed clubsto make significant savings on copying and also on postage. The changes are also obviously good for the environment. We’ll also further investigate a club’s reporting obligations under Clauses 17 and 18 of the Registered Clubs Regulation and where a club stands when a member demands to see the financial records of the club.

Court decisions are also a timely issue, and we’ll review the important Centro decision which reminds directors that they cannot simply delegate away their responsibilities to management or persons with expertise. They must bring their own minds to bear on the situation before them. The Centro decision involves a very complex set of facts but the lessons to be learned are clear and apply not only to directors of large public companies listed on the stock exchange but also to directors of community clubs.

Furthermore, we’ll also examine an important court decision dealing with bullying, intimidation, and harassment in the workplace and how if left unresolved it can have very serious adverse impacts on the person who is subject to the bullying and also the club, with potential serious legal exposure. The new Workplace Health & Safety Act will be discussed and how it fits into this area while exploring the types of bullying that can take place and the way it’s carried out – for example, by the use of technology. What’s more, we’ll review what to do if a club receives a request for the release of information about a member and how careful a club must be in these circumstances. As part of this there’ll also be a discussion on subpoenas which are issued by a court and what to do if your club receives one.

With a range of other issues to be examined within the Legal & Financial Risk Management seminars, highlights include the issue of misappropriation of club funds and what a club needs to do in these circumstances. These can be very confusing and difficult times when a problem is uncovered; a club needs to act carefully and must seek appropriate legal advice to handle the situation. Also within our focus will be a club’s obligations under the anti-discrimination laws, focusing on physical disability and access to your club. And, how does a club minimise its potential liability when it hires out its sporting facilities or its functions room? The best method of protection is to have an agreement in place with appropriate indemnity provisions giving as much
protection to the club as possible against such things as injury to person or property.

No doubt there will be other areas for discussion which will arise as we work through the seminar, particularly as directors relate some of their experiences or who are going through the issue being discussed at that moment. As a valuable way for directors to learn through interaction and discussion, this next round of seminars won’t want to be missed.

For a full schedule of available locations, dates, and times, refer to the advertisement on the inside front cover of this issue of Club Director or visit clubsnsw.com.au/cdi

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.