How current is your constitution?
When did you last review your constitution?
Most For Purpose organisations have morphed from incorporated associations into proprietary companies. As a result, they should have updated their Articles of Association into a Constitution. The club industry is a highly regulated (especially in NSW) and legislation changes with monotonous regularity.
To ensure your constitution is current, the best option is to review it whenever the legislation changes, or at least every year. Legal counsel should be keeping on top of the legislation for you, and certainly ClubsNSW as the peak industry body, constantly monitors and communicates changes to legislation to its members.
If you haven’t reviewed your constitution in the last five (5) years it will probably need a refresh. Your constitution needs to be fit for purpose and, as we discussed in my January-February communication, needs to be reviewed to match the latest make up of club members. You should also review the Objects of the club as these may have changed over time, with the societal changes and diminishing numbers of “playing” members in some sports clubs, and service men and women in the RSL and Legion clubs.
When you have reviewed your constitution, it should be -
x compliant with all the latest legislative changes
x reflect the objects of the club
x stipulate the election cycle the club uses or would like to use
x stipulate the number of board meetings being held each year
x address the retention or removal of the Five Kilometre Rule for membership
x address the retention or removal of membership fees
x review the membership categories and the rights of each category
x set out how disciplinary matters are handled
We will talk about the detail shortly, however you also need to understand that to actually change your constitution requires a Special Resolution at a general meeting. Only members with full voting rights for Special Resolutions can vote on these, whereas usually all members can vote on ordinary resolutions.
Restrictions on change
Any Special Resolution requires at least seventy-five (75) percent of members, attending the meeting and eligible to vote, to approve the resolution for it to pass. Often this can mean a situation where a very small number of members have the power to make significant changes to the constitution, especially when clubs have a small number required for a quorum at a general meeting.
Example
Your club has 10,000 members, a mix of ‘core’ members and social members, and the quorum for a general meeting is fifty (50) members. At your meeting 50 financial members attend, so a quorum is established, however for a special resolution there are only 20 members attending with full voting rights. The vote is put and so long as 15 members approve the resolution, it will be carried. 15 members have now legally changed the constitution, which affects all 10,000 members.
I constantly advocate to client clubs that any special resolutions, particularly those relating to constitutional change, must be socialised well in advance of the vote. In fact, my mantra is to advise the membership at this year’s Annual General Meeting (AGM) that you will be voting on key special resolutions at the next AGM. This will give you a full 12 months to communicate the resolutions, the reasons for the proposed change, and the opportunity to hold information sessions for members to attend and discuss the implications of, and any concerns they have about, the resolutions.
It is also advisable to separate critical resolutions as stand alone, in order to allow each resolution to stand or fail on its on merit. Aggregating resolutions is fraught, as when one contentious resolution is voted down, the whole lot of combined resolutions must fail.
Key constitutional points to consider
Let’s have a brief look at the points I mentioned earlier. Your constitution should –
x be compliant with all the latest legislative changes
o review the Registered Clubs Act, the Corporations Act, your state gaming and liquor legislation, anti-Money Laundering and Counter Terrorism Financing (AML/CTF) Act;
x reflect the objects of the club
o ensure you are clear on what you do, who you support and how you are able to make that happen. Avoid being overly prescriptive as this may end up restricting what you can do to deliver on your objects;
x stipulate the election cycle the club uses or would like to use
o Clubs use Annual (every year), Biennial (once every two years) or Triennial election cycles (election every year for one third of the board where directors are elected for a three year term) which are stipulated in the constitution. How the board elections are run should also be clearly spelled out;
x stipulate the number of board meetings being held each year
o The legislation mandating monthly meetings has been repealed so clubs now only need to meet at least quarterly to comply, however it is up to the individual clubs to decide on board meeting frequency;
x address the retention or removal of the Five Kilometre Rule for membership
o long an issue of contention in the community, some clubs may choose to retain this requirement, whilst others may choose to remove it;
x address the retention or removal of membership fees
o the mandated minimum annual fee of $2.00 has also been removed, so again it is up to clubs to decide and note in their constitution, the requirement for membership fees;
x review the membership categories and the rights of each category
o the constitution defines each category of membership and these should be reviewed with an eye on the registered Clubs Act guidelines relating to the minimum percentage of overall membership that a category must meet to be a legally viable membership category;
x set out how disciplinary matters are handled
o your constitution should address the Disciplinary procedure that must be followed to ensure procedural fairness, when handling citations for inappropriate behaviour of members and can define appropriate penalties (although these are usually the domain of By Laws).
Ideally when you review your constitution, you will talk to your legal counsel for final legal oversight and ratification. As a word of caution, it is definitely advisable to use an experienced club industry legal firm, like Pigott Stinson, Thomson Geer, Elite Legal or others, who are fully versed in the club industry legislation, rather than a local solicitor who is not across the nuances of our specialist industry.
For further assistance with an initial review of your constitution, contact Ron Browne, Managing Consultant 0414 633 423 ron@extrapreneurservices.com.au
