Review of the Registered Clubs Industry in NSW - Clubs NSW

11 Making it easier for clubs to amalgamate
Box 11.2 Alternatives to voluntary liquidation as a means of winding up the other
club’s business
Option 1 – Deregistering the other club. Under this option, the assets and liabilities of the
other club are transferred to the parent club and then this club is deregistered. The manner in
which the other club’s business is transferred to the parent should be negotiated and set out in
the amalgamation’s MOU. The benefit of this option is that the vote to deregister the other club
can occur at the same meeting as the vote on the amalgamation. It should also be less costly
than bringing in a liquidator. However, for this option to be possible:
the constitution of the club being dissolved must not prohibit disposal of club assets
to deregister the other club, this club must:
– no longer be carrying on business
– have assets worth less than $1,000
– have no outstanding liabilities
– not be a party to any legal proceedings
– ensure all fees and penalties under the Corporations Act 2001 are paid.
the vote to deregister must be approved by all members.
Given the nature of the industry, getting all members to vote and agree constitutes a virtually
insurmountable barrier.
Option 2 – Making the other club a subsidiary of the parent club. Under this option, the
parent club would take control of the other club in a transaction akin to a takeover. The other
club would still exist as an independent legal entity, so would not need to be wound up. Note
that under the Registered Clubs Act, this would not be considered an amalgamation. The
following procedures would need to be followed:
the process to effect the takeover is set out in negotiating the MOU (including issues related
to control, structure of the subsidiary’s board of directors, dealings with assets etc)
members then vote on the proposal to amalgamate and, if approved, they also vote at the
same meeting to effect the takeover
if the members approve the vote to effect the takeover, then the procedures agreed in the
MOU are implemented
once the takeover has been completed, the other club lodges a form with the Australian
Securities and Investments Commission to inform of a change in its company structure.
This option offers few practical benefits to the parent club, so it is not clear that a stronger club
would be willing to enter into such an arrangement. The other club would continue to be a
company limited by guarantee and so will have its own board of directors. The parent club can
negotiate in the MOU to have a certain representation on the subsidiary club’s board, but the
members of the subsidiary club can vote those directors off the board at the next election.
Further, the legislative scheme requires that any profits or income from a club shall only be
used for the promotion of that club, and prohibits a club from distributing its profits to
members. This raises doubts as to whether the parent club can derive any ongoing benefit
from the future revenues of the subsidiary club.
186 IPART Review of the Registered Clubs Industry in NSW