Austinmner Bowling Club Ltd.

Question: Discuss about the Austinmner Bowling Club Ltd. Answer: Introduction: Austinmner Bowling Club Ltd (the Club) was a company limited by guarantee and a registered club. It had 552 members containing 460 Social Members, 85 Bowling members and 7 Life Members as on May 31, 2007. The club started facing financial problems and an option for shutting down the bowling activities was considered. From June, 2007, there was a drop in number of membership renewal by the bowling and social members. The bowling activities closed in September 2007 and on October 22, 2007, the club advanced for voluntary administration. Mr. Russell was arranged as the administrator and at that time the membership stood at 384 members containing 326 Social Members, 52 Bowling Members and 6 Life Members. The administrator sought out different amalgamation plans but none proved successful. Finally, the Club went under liquidation and Mr. Russell was assigned as the official liquidator on December 11, 2007. Being the liquidator, he sold some of the assets of the Club and expected a surplus of $850,000. The case revolves around the distribution of this surplus. Relevant Laws Companies Act 1961 (NSW)- Section 16(5) Registered Clubs Act 1976 (NSW)- Sections 4, 30(1)(a), 30(9), 41J Corporations Act 2001- Section 231, 479(3), 511(1)(a), 511(1)(b) Actual Decision To decide on the distribution of the surplus amount, the judge of this case clarified a few points. The first point of discussion was the clarity on the definition of the word members. The Memorandum of Association of the Club (MOA) contained that in case of a surplus, it should be transferred to some institution(s) having similar or partly similar objectives as of the Club. The institution(s) has to be decided by the members of the Club. The MOA did not define the term members and also did not contain any subdivision of members into classes. The judge held that the MOA in no way held, which members can or cannot make the decision with regard to surplus. Since MOA could not clarify the matter, a reference to the Articles of association (AOA) was made. The AOA also was silent on which members are to take decision in case of a surplus. Though the AOA did contain provisions regarding members meeting and did not provide any other mode for decision making by the members other than a voting by the members. The counsel had referred to the Registered Club Act stating that the Social Members be considered as full members and that Social Members be qualified to vote in the elections of the regulating body of the Club. On this the judge held that the provisions of the Registered Club Act are not related to the case. In view of the clause 6 of MOA referred to by the counsel, the judge stated that the clauses did not give every member a right to engage in the determination of surplus. And that it would not be permissible for the Court to impose a plan or method for decision making by methods not stated in MOA. The judge was of the view that excluding the Social Members from engaging in the decision of surplus would be not unjustified. Even though the Social Members were liable to pay in case of winding up, the amount was just $2 which was less than ten times the annual fees of Bowling Members. He also held that the decision of including the Social Members in decision making process was a completely different matter. The AOA through its different clauses held that the Social Members could not be present at the meetings and vote at any of the meetings. And they could not be present and vote at the meeting where a decision on the utilization of the surplus had to be made. Providing relief to Mr. Russell, the final decision was made stating that the determination regarding the administration of the surplus had to be taken at a meeting. And that only the Bowling members and the Life members could attend such meeting. Conclusion To conclude, the decision of the judge in this case was reliant upon the clauses of AOA. The reason behind the reliance on AOA was the absence of related provisions in the MOA. By understanding the words of articles in the given case, the judge was able to give his verdict by disallowing the Social Members from attending the meetings where the decision about utilization of surplus had to be taken.