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

The triennial rule and your club

Club readers will be aware through Clubs NSW E-Circular 11-191 on 24 November 2011 that both houses of the NSW Parliament passed the “Clubs, Liquor and Gaming Machines Legislation Amendment Bill 2011” late last year.

As the E-Circular pointed out:

“In many areas, but particularly in relation to corporate governance changes, the Bill does not take effect until the Regulations are proclaimed. Effectively, the government has created reserve powers so that at a later stage if required, it can introduce enabling regulations.”

The purpose of this column is to refer to 1 of those changes which relates to the method of electing the Board. Without wishing to sound like a broken record, readers are reminded that this change-along with others – will only become effective when regulations are passed. Clubs NSW are currently working on a response to the Act and it may well be that the final outcome will involve further changes

Section 30(1) (a) and (a1) of the Registered Clubs Act now provides that:

“The rules of a registered club shall be deemed to include the following rules:

(a)       Except as provided by paragraphs (a1) and (a2), the governing body of the club responsible for the management of the business and affairs of the club is to be elected:

(i)        annually; or

(ii)       if a rule of the club so provides-biennially; or

(iii)      if a rule of the club so provides-in accordance with Schedule 4,

            at an election in respect of which the full members only of the club (or a subclass of full members determined by a rule of the kind referred to in subsection (9)) are entitled to vote.

(a1)     If the regulations so provide, any election under paragraph (a) is to be in accordance with Schedule 4.”

Schedule 4 of the Registered Clubs Act sets out what is known as the Triennial Rule.

The effect of section 30 (1) (a) is that a Board of a Club can at the moment only be elected in one of three ways, either:

–      -the whole of the Board annually, or

–      -the whole of the Board biennially (every 2 years), or

–      -in accordance with the Triennial Rule.

So the whole Board can be elected at the one time for a one year term or a 2-year term but does the Triennial rule mean that all directors can be elected at one time for a 3-year term? The answer is no. The Triennial Rule is a rotating system where one- third of the Board retire each year and members elect directors to fill those positions and the directors are elected for three-year terms.

In order to adopt the Triennial Rule the Club’s Constitution would need to be amended by members approving a special resolution at a general meeting or at the Annual General Meeting. At least 21-days’ notice in writing of the proposed special resolution must be given to members.

As with any proposed change to a club’s constitution great care needs to be taken in drafting the amendment. Clubs should seek legal advice if the board decides to seek members’ approval to the adoption of the triennial rule. The notice needs to clearly set out the precise terms of the proposed change and an explanation must also be given so that members can clearly understand the proposal. One point to keep in mind is when the triennial rule is to take effect. Generally it will take effect in time for the following election of the board however this needs to be carefully pointed out in the special resolution.

For advice on for your Club and the effect of the triennial rule 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.