The law of clubs – they can be tricky!
The law of clubs can be extremely complex and may lead to unexpected consequences for both members and officers.
There are hundreds of thousands of clubs in the UK. According to the Sports Club Survey (the largest ever survey of sports clubs in the UK, published by the Sport and Recreation Alliance in 2013), there were more than 151,000 sports clubs alone in the UK, with each club having an average of 141 adult members. In addition to those, there are thousands of other non-sporting clubs-social clubs, Working Mens’ clubs, garden guilds, and the like. You may well belong to one yourself. What they have in common is that they are almost all “unincorporated associations”. That is, the membership adopts rules that the members all agree to abide by, and elect officers to run the club. When new members join they have to abide by those rules as well, to enjoy the privileges of membership.
What is a club?
A club is simply a group of people who have a common cause or interest-such as running a village hall, or a gardening guild. An organisation like this is an “unincorporated association” and has no legal identity of its own, unlike a company or partnership. As a result they can only act through their officers, or other authorised members of its management committee. They may also be a charity (in which case they are also subject to the requirements of the Charities Act).
The rules of the club (often called its constitution) are critical; they determine how the officers and other management committee members of the club are appointed, and what powers they have. If the rules aren’t followed then potentially the committee members aren’t appointed lawfully, and so their actions may not be lawful either. This could result in the committee members being personally liable for the actions of the club.
The rules also need to deal with how members join the club, how they can be expelled, how often general meetings of members are called and how the officers are appointed, amongst other matters.
Sometimes clubs are part of a national network, or are federated or affiliated to a larger organisation. Working Mens Clubs and Scout troops are examples of this. One of the benefits of membership of a network is the ability to adopt a common set of rules, which have probably been professionally drafted. If this is not possible, it is a very good idea to get professional advice on the rules that should be adopted. The importance of a comprehensive and appropriate set of rules is highlighted when there is a dispute within the club between one or more of the members, particularly if the dispute involves an officer. This is, unfortunately, not uncommon. It is worth thinking about this when considering your own rules-if say the treasurer was suspected of financial impropriety, how would you investigate it, would you have the power to suspend them while you do, and if you needed to remove them how would the club operate while this process was going on?
Who may become a member is defined by the rules; however, the rules on membership must not breach the legislation relating to race, sex, religious and sexual orientation. The management committee of the club must carry out the expressed wishes of the members, so the rules must also provide for regular meetings where these wishes are discussed (often an annual general meeting), as well as a way for members to call for a meeting should they wish to discuss specific issues (sometimes called an extraordinary general meeting). In order to prevent abuse by wayward members, the rules usually provide that a request for an extraordinary meeting must be seconded by at least one other member. There should also be some means of expelling members who breach the rules of the club, just in case it becomes necessary to do so.
Officers and committee members
If their appointment is lawful and they act lawfully, then the officers and committee members act as agents for the members and hence are entitled to be indemnified by the assets of the club and (if provided for by the rules) by the members. Normally a club will appoint at least a chair, a treasurer and a secretary; these officers form a management committee together with any other members of the club who are appointed to it. It is this management committee that administers the club’s actions in accordance with the wishes of its members as expressed in meetings. The officers are also responsible to the club’s members in the event of their misfeasance in office.
Because a club has no legal identity of its own, it cannot itself form contracts, bring legal claims (or defend them) or own property. It must do so through the officers. Hence the officers may be exposed to personal liability. If the club’s assets are not sufficient, or the officers are unable to get an effective indemnity, it is possible that a creditor of the club for instance could pursue an officer that contracted with them personally. This can lead to difficulties; for instance an officer may contract with a supplier of goods. If the officer then leaves that post (and often the term of office is only a year) or the club itself, then the supplier can still look to that officer if the club doesn’t pay the supplier. They would be entitled to an indemnity from the club of course, but that might not be much comfort if the club has closed down.
Legislation and regulatory compliance
The officers are responsible for the club’s compliance with any appropriate legislation-for instance Health and Safety, liquor licencing and so on, and in particular the Equality Act 2010 and the General Data Protection Regulation. They are also responsible for ensuring that appropriate insurance cover is obtained. Again if they do not do so they may be personally liable. Bear in mind that if the club maintains membership records on a computer, this almost certainly requires it to register with the Information Commissioner in order to comply with the Data Protection Act.
Property and finance
Often the club (through its officers) will hold property such as its clubhouse or equipment. These assets are the property of the members as a whole, so that if the club is dissolved the money received will be divided equally between those persons who are members of the club at the time. However, as the club does not have a legal identity it cannot own property itself but must do so through its members. If the property is leasehold or freehold, this can present a real difficulty especially if officers die or leave the club without first transferring their ownership to the officer replacing them. For this reason it is often better to consider either having the officers act as trustees to hold the property, or incorporation ie turning the club into a limited company. A company does have legal identity-running a company is more expensive than running a club because of the formalities involved, but it does provide much better protection to both club and officers in the event of difficulty. It also allows the club to obtain finance by borrowing on the security of land if desired.
The post of club treasurer is often the most important office. The treasurer is responsible for keeping accurate and up to date accounts of the club’s assets including its cash and investments. The value of these assets can be considerable, particularly if land is held. If so, it might be appropriate to involve professional accountants to ensure that there is no impropriety, as well as basic security measures such as requiring two signatures on cheques. There may also be complex tax implications in some cases, if the club is involved in investments or receives an income other than from its members.
There is no obligation to file accounts (as there would be with a company) but an annual report must be presented to the members at each annual general meeting, and it would be good practice to review the accounts at each meeting of the officers.
An employee of a club has the same rights and remedies as any other employee, and the club officers are also required to comply with employment legislation. Hence it is perfectly possible for an employee to bring a grievance against a club, and to make a claim in the Employment Tribunal. The respondent to any claim would be the officers who were responsible for entering into the employment contract.
One of the most common problems that club members face is what they can do if they feel that one or more of the club’s officers are behaving improperly. For instance, a member may have been wrongly barred from entering the club’s premises by the chair, or they suspect one of the officers are fiddling the books in some way. Of course criminal activity can always be investigated by the police, but in the absence of evidence this can be difficult. Unfortunately, finding an appropriate remedy can be very challenging without the support of other officers.
Wrongdoing by a member is easier to deal with, but the officers would still need to consider the issue in accordance with the usual rules of natural justice-they must act fairly, investigate properly, act without bias or self interest, have an appeals process, and apply appropriate sanctions. Again, well-drafted rules should provide for all of these possibilities.
Clubs that have joined a federation (such as the Club & Institute Union) may have adopted rules that provide a dispute resolution process and an appeal mechanism, involving an external body. That external body has the right to investigate and hear evidence before making a decision. If the rules do not provide for that, dealing with wrongdoing by an officer can be extremely difficult. Often the only way forward is to try to change the officers, by calling an extraordinary meeting if the rules provide for it, raising the matter at the Annual General Meeting, or putting forward alternative candidates when the officers’ posts fall due for re-election. If there is evidence of improper behaviour that falls short of criminality, then that evidence could be used in a civil claim brought by a club against a defaulting officer for loss and damage caused to it.
For further require advice on club law or on any other dispute resolution matter, please contact Dermot Callinan on 01782 525010 or by email to email@example.com.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.