Is it time to update your Registered Club Constitution?

A Registered Club in New South Wales is generally operated as an Australian company limited by guarantee.  What that means is that the company limited by guarantee is a company formed on the principle of having the liability of its members (that is the company’s members and not the individual “club members”) limited to the respective amounts that the relevant member undertakes to contribute to the property of the company if the company is wound up.  When a company limited by guarantee is wound up without adequate funds to discharge its liabilities each person who is a member at the commencement of the winding up is liable to pay an amount that the member has undertaken to contribute if the company is wound up (which is usually a nominal amount).

Further, the internal management of an Australian company may be governed by a company Constitution.  This document is often referred to as the articles of association, articles of incorporation or by-laws in other jurisdictions and was previously known in Australia as a memorandum and articles of association.

What is a Constitution?

A Constitution is effectively a contract between the Company, its members and its club members under which each person agrees to observe and perform the Constitution as rules so far as the they apply to that person. While Registered Clubs must abide by state and federal laws in relation to the operation of the Company and the club, they are also legally bound to abide by the Constitution.

It is important for every club to ensure that for corporate governance purposes its Constitution is:

  • up to date;
  • consistent with clubs’ legislated obligations;
  • sets out key legislative requirements that relate to registered clubs;
  • internally consistent (ie there are no clauses that contradict each other); and
  • reflects and supports best practice.

Poorly constructed or outdated Constitutions (such as Articles of Association adopted before 2001, the year that the ‘Corporations Law’ was completely transformed in to the Corporations Act 2001 (Cth)), or a failure by clubs to understand their own rules, often result in complaints to the Club Code Authority (and/or to Liquor & Gaming NSW, ASIC or other entities, and could possibly even result in legal challenges in relation to the operations of the club).

Some Key Points for Registered Clubs in relation to reviewing their Constitution

 KEY POINTS – OBJECTS

  • Make sure your “objects” focus your club and are consistent with the requirements of the Registered Clubs Act.
  • Make sure that the objects do not restrict the club and allow it to do whatever it may lawfully do.

 KEY POINTS – DISCIPLINARY MATTERS

  • Ensure that the disciplinary process is clearly set out in the Constitution to afford all members natural justice.
  • Ensure your Constitution as a minimum complies with ClubsNSW Code of Practice Best Practice Guidelines: Conducting Disciplinary Proceedings.

 KEY POINTS – MEMBERSHIP

  • Consider whether limiting voting rights to certain segments or interests groups in your community is food for the long term viability and relevance of your club.
  • Ensure your classes of membership and subscription fees are consistent with the requirements of the Registered Clubs Act.

 KEY POINTS – MEMBERS’ MEETINGS

  • Ensure your meeting processes and notice requirements comply with and are consistent with the Corporations Act.
  • Ensure the process for calling a general meeting is clear and that it complies with the Corporations Act.

KEY POINTS – DECLARATION OF INTERESTS

  • Ensure the Constitution reflects the requirements of the Registered Club Accountability Code.
  • Ensure the Constitution clearly sets out the requirements of the Directors under the Registered Club Accountability Code.

For assistance with your Registered Club Constitution email Michael Anderson at michael.anderson@elitelegal.com.au or call him on 02 8515 8062