Procedures for winding up a club
If the club is to be wound up the Officers and Committee often face criticism and could potentially face legal action and suffer financial loss. Accordingly, it is important that the proper procedures are followed and professional advice is obtained at an early stage of the process.
1. The first reference point is the club’s rulebook which should outline the procedures to windup the club. The rulebook usually states that the authority to close the club and cease trading is the decision of the members at a duly convened members meeting, thus the first step should be to call a General Meeting of the members.
2. It is far easier to wind up a solvent club than an insolvent club. It is also easier to wind up a club registered as a Co-operative and Community Benefit Societies Act 2014 (Registered Society) than an unincorporated club or a club registered as a Friendly Society. Registered Societies has ‘Limited’ at the end of their name and do not have Trustees.
3. Once the decision has been made the club will have to be formally wound up, either, by the Official Receiver, the bank, brewery or by a liquidator appointed by the club. If the club is solvent it can be wound up by the members without resort to a liquidator or receiver, please refer to the FCA website on the ‘instrument of dissolution’. If the liquidator has to be paid out of club funds it can be expensive. If the club is insolvent and has no funds to pay a liquidator it will be reliant on the bank, brewery or other supplier applying to Court for the club to be wound up and to eventually appoint the Official Receiver.
4. It is almost certain that the process to wind up the clubs affairs will take longer than you originally anticipated. Work on a time frame of one years.
5. All creditors must be treated equally, with the exception of employee’s wages do not give ‘preference’ to one debt over another. For example, if you can only afford to pay only half the clubs debts do not pay any one supplier more than 50p in the £1.
6. If the club owns the premises freehold there may be a surplus when the club is wound up. This surplus will be distributed in accordance with the clubs rules; these usually require any surplus to be distributed back to the sponsoring body or equally to all members. Where the club rules are silent on the distribution of any surplus the legislation requires the surplus to be distributed equally to all members regardless of length of membership.
7. However, if members expect a payout from the sale of the club premises they may be disappointed. By the time debts are repaid, the licensed insolvency practitioner, estate agent fees, outstanding tax liabilities paid there is usually none or little surplus. This has especially been the case in recent years with the excess supply of vacant licensed premises and the depressed property market.
8. If there is a deficit the liability of officers and members is dependent on the legal status of the club. If the club is Registered Society the liability will end with the club. Officers, members and employees will not normally be liable to meet the shortfall in the clubs funds. In respect of Friendly Societies and unincorporated clubs the situation is complex and members have unlimited liability (jointly and severally) for the debts of the club.
9. To avoid responsibility for the debts of the club the Committee or members should not give personal guarantees to the club’s lenders or suppliers.
10. Ensure the membership register is accurate and up to date. In the event of a surplus or deficit on winding up the membership register becomes an important record and should be kept in a safe and secure place by the Secretary.
11. If items are to be taken from the club offer members the option to buy any assets at a market value, for example, furniture or equipment. At a subsequent date you may have to be able to prove that a fair market price has been paid. Cellar stock should be run down prior to closure.
12. If the club is a Registered Society and has insufficient funds to pay redundancy there may be government funds to cover statutory redundancy. The liquidator or receiver should be able to provide you with further details.
13. Ensure you know the location of the deeds for the clubs premises. If the deeds are in the name of Trustees ensure they are available to sign documents. Deeds are not required if title is registered with the Land Registry, although, many solicitors still request to see original documentation to confirm such matter as land boundaries and covenants.
14. Ensure the club premises are secure and continue to be maintained, the element of the clubs insurance policy covering the building, fittings and third party liability must be continued. Discuss the security of the club’s premises with the secured creditors such as the brewery or bank.
15. Continue to maintain bookkeeping system, keep a record of any income or payments. This can be used to demonstrate to members and third parties that proper procedures have been followed. Ensure key documents such as insurance papers are kept in a safe place.
16. Complete and submit VAT returns. Inform H M Revenue & Customs that the club has ceased trading and that you wish to de-register for VAT, write to the local VAT office.
17. H M Revenue & Customs need to be informed that the club has ceased trading; a final corporation tax return may be required for the final period prior to closure.
18. Keep members informed. Call a Special Meeting at another local club within 2 to 3 months of closure; advertise the meeting to members using the local paper. Remember keep the brewery, suppliers, ourselves and other interested parties informed.