If your golf club goes bust, are you at risk?

These are tough times for clubs and many are unincorporated. Where do you stand as a committee member and trustee if the club is insolvent?

The question would probably not have got onto the radar a decade ago, but now, with some clubs going bust, the risks facing committee members are becoming alarmingly clear.

Traditionally clubs are run by an elected committee, the members of which are legally trustees. This makes them liable for the club’s debts, which in recent insolvency cases have proved substantial.

There is a strong argument for clubs to become limited companies as a result, so what does this entail?

Taking your golf club limited…

To do this you will need a new constitutional set up to be agreed by your members, with appropriate articles in place to define how the club will be owned and run.

The old club’s assets must then be transferred legally to the new limited company. This could create stamp duty land tax issues, so it is vital to take proper professional advice first.

The new limited company would be run by a Board of Directors and club members would be shareholders (who would only be liable for the company’s debts up to the nominal value of their shareholding, probably £1).

With member turnover averaging around 15% in UK clubs it is important that the company’s articles allow for the recouping of shares if they leave, but this is easily achieved.

Incorporating offers decent financial protection and especially if clubs take the opportunity to introduce professional managers onto the Board to ensure good governance.