Who Runs the Club – the Board/Committee, or the Members?
Written by Victor Hamit

Frequently, confusion arises over whether members have the right to direct management or the board on the business of the club. The general proposition is that the business and affairs of the club are in the hands of the board or committee, with the board then delegating those responsibilities to executive management. Therefore members cannot direct the board on a business matter. The general proposition, however, is subject to the club’s constitution.

For the purposes of this article, we use the expression “board” to mean either the board or the committee of management of a club.

For example, if a board decides to change the long standing logo and marketing of the club, then any attempted resolution by the members in general meeting to direct the board to return to the old logo will not be effective to compel the directors. This proposition is of course subject to the club’s constitution.

It would be a very unusual constitution that would require the approval of members to a marketing strategy for the club.

If the members are dissatisfied with the Board over the management of the business of the club, then there are remedies.

A remedy for the members is generally to remove any one or more of the directors and replace them with persons who believe the old strategies were in the best interests of the club. Also, the members have the right to amend the constitution to require such a matter to be referred to the membership for a decision. In some cases members can take matters to court.

Many club constitutions require the approval of the members on certain issues, such as the sale of any of the club’s real estate, or the setting of membership fees.

Woolworths Case

So, it is with interest that many have observed the lead up to the Annual General Meeting of Woolworths Ltd on 22 November 2012. More than 200 members of Woolworths Ltd were assisted by activist group GetUp Ltd in requisitioning Woolworths to call an Extraordinary General Meeting of members pursuant to the provisions of the Corporations Act. The requisitioning members were seeking to amend Woolworths’ Constitution with effect from 1 January 2016, the amendment, if passed, would prohibit Woolworths’ directly or indirectly owning, operating or deriving income from gaming machines that offered games to the public:-

at a cost of more than $1 per button push;
by a machine capable of generating net revenue at an average rate of more than $120 per hour; and/or
for more than 18 consecutive hours in a 24 hour period.
As a result of proceedings in the Federal Court, GetUp Ltd was appointed representative of the requisitioning members, resulting in an Extraordinary General Meeting of members being held on the same day, but prior to, the Annual General Meeting.

The Special Resolution to amend the Constitution was defeated with over 95% voting against the change.

Why did GetUp Ltd seek to amend the Constitution? Two reasons were offered;

that the Board and Management of Woolworths in conducting the business were not bound to follow the requests of members unless required by the Constitution; and
the actions of GetUp Ltd ensured media publicity for its cause.
An example of the publicity generated can be seen from the Age online report dated 22 November 2012 and headed “Woolies Wins Pokies Vote but Loses PR Battle”.

The Woolworths Constitution placed the business and affairs of the company in the hands of the Board, reinforcing the Corporation Act.

For incorporated associations in Victoria, a similar rule can be found in the Model Rules contained in the Associations Incorporation Reform Regulations 2012 (“the Regulations”) which provides:

“The business of the Association must be managed by or under the direction of a Committee.”

Associations Reform

Clubs and officers will now be aware that the Associations Incorporation Reform Act 2012 (“the Reform Act”) and the Regulations came into effect on 26 November 2012. It is recommended that clubs review their Constitutions to ensure compliance with the new Reform Act and Regulations. Many clubs will need to amend their constitutions following a review. It also offers an opportunity to consider the appropriateness of the Constitution in current circumstances. Clubs incorporated under the Corporations Act are not affected by the Reform Act and Regulations.

Article Published in Club Connect January/February 2013

Share
Victor Hamit
Wentworth Lawyers
Level 40,
140 William Street
MELBOURNE VIC 3000

Email: vhamit@wentworthlawyers.com.au
Website: www.wentworthlawyers.com.au

Tel: +61 3 9607 8380
Mobile: +61 408 590 706

Disclaimer:

These materials are provided as a general guide on the subject only, not as specific advice on any particular matter or to any particular person. Please seek specific advice on your own particular circumstances as situations and facts vary.
Liability limited by a scheme approved under the Professional Standards Legislation