Appointment of Committee Member: Advice required

prophet01

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Our sports club Articles of Association states the following in relation to the appointment of Committee Members other than at an AGM;

"Subject to the aforesaid, the Company may by ordinary resolution appoint a
person who is willing to act to be a Committee Member either to fill a vacancy or
as an additional Committee Member."

The "Subject to the aforesaid" bit simply refers to the preceding paragraphs relating to appointment at an AGM.

I'd be grateful if any knowledgable person would confirm whether or not that statement means that the Committee is able make appointments without the neeed to consult all of the 300+ members.
 
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prophet01

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Here it is thanks;

8. Appointment and retirement of Committee Members

8.1 The maximum number of Committee Members holding office at any time shall be
twelve. The minimum number of Committee Members holding office at any time
shall be four.

8.2 No Committee Member shall be required to retire or vacate his/her office, and no
person shall be ineligible for appointment as a Committee Member, by reason of
his/her having attained any particular age. No notice of any resolution appointing
or approving the appointment of any Committee Member shall be required to state
the age of the person to whom such resolution relates.

8.3 At each annual general meeting of the Company all the Committee Members shall
retire from office. If the meeting does not fill the vacancy left by any retiring
Committee Member, that Committee Member shall, if willing to act, be deemed
to have been re-appointed unless at the meeting it is resolved not to fill the
vacancy or unless a resolution for the re-appointment of the Committee Member
is put to the meeting and lost.

8.4 Not less than 35 days before the issue of the notice of an annual general meeting
the Committee shall display a notice in a prominent position on the Company's
premises advising members of the forthcoming annual general meeting and giving
to the members not less than 28 days in which to propose a person as a Committee
Member. Any such proposal shall be writing signed by a proposer and a seconder
and by the person being proposed and shall be delivered to the secretary. The
notice of annual general meeting shall identify any persons who have been
proposed as Committee Members in accordance with this article.

8.5 Subject to the aforesaid, the Company may by ordinary resolution appoint a
person who is willing to act to be a Committee Member either to fill a vacancy or
as an additional Committee Member.
 
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Newchodge

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    If there are any conditions about ordinary resolutions, they have to be followed. Otherwise there is nothing to stop the committee, provided there are not more than 12 committee members.
     
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    prophet01

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    @KAC
    To answer your query
    From the Articles:
    "member" means a member of the Company from time to time;

    "The subscribers to the memorandum of association of the Company and such
    other persons as the Committee shall admit to membership pursuant to these
    articles shall be members of the Company._For the avoidance of doubt persons
    holding the status of Student Member, Junior Member, Temporary Member or
    Social Member save and except a "Long standing social member"( each as defined
    in the rules to be adopted pursuant to Article 16.1) although called "members"
    shall not be admitted to membership of the Company.

    The reason I'm asking the question is that recently, and historically, Committee appointments have been made by the Committee and simply been notified to the members.

    I suppose it hinges on the definition of "Ordinary resolution".
    The Companies Act defines "Ordinary resolution" as;
    An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority.
    Perhaps they've been reliant on the "or a class of members", bit. The class of members being the Committee members. Hmm.
     
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    KAC

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    @KAC
    To answer your query
    From the Articles:
    "member" means a member of the Company from time to time;

    "The subscribers to the memorandum of association of the Company and such
    other persons as the Committee shall admit to membership pursuant to these
    articles shall be members of the Company._For the avoidance of doubt persons
    holding the status of Student Member, Junior Member, Temporary Member or
    Social Member save and except a "Long standing social member"( each as defined
    in the rules to be adopted pursuant to Article 16.1) although called "members"
    shall not be admitted to membership of the Company.

    The reason I'm asking the question is that recently, and historically, Committee appointments have been made by the Committee and simply been notified to the members.

    I suppose it hinges on the definition of "Ordinary resolution".
    The Companies Act defines "Ordinary resolution" as;
    An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority.
    Perhaps they've been reliant on the "or a class of members", bit. The class of members being the Committee members. Hmm.
    Silly question but ae you trying to upset the applecart :D

    Is it a company limited by guarantee? Do you all sign up to being a member when you join and do you all have a vote at the AGM?

    I need to stress that I am not a lawyer but if you answered "Yes" to the above questions, then I suspect that the Committee may not be acting in accordance with the Articles of Association. I have never heard of a Committee being a "class of members".

    For what it is worth I was once a volunteer with a therapy dog charity and objected to the way in which it was being managed. I might just as well have hit my head against a brick wall and we ended up taking out our own insurances and left the charity to paddle its own canoe :rolleyes:
     
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    Mr D

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    For what it is worth I was once a volunteer with a therapy dog charity and objected to the way in which it was being managed. I might just as well have hit my head against a brick wall and we ended up taking out our own insurances and left the charity to paddle its own canoe :rolleyes:

    Unfortunately there is no shortage of badly managed groups.
    The people running it tending to be the ones wanting the job, not the ones best able to run an group.
    One butcher, a bunch of sheep....
    And the sheep do as they are told.

    Nice to find people that even query things.
     
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    prophet01

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    @KAC
    Nah. Not trying to upset the applecart. That's just a natural consequence of simply questioning.

    The company is limited by guarantee. Members do sign up to being a "member" when they join and are entitled to vote at any general meetings.

    Circumstance is that a group within the club has legitimately convened an EGM in a hostile bid to take control of the Committee, hence the whole club. The resolution is to remove the entirety of the current committe and to install their placemen. Acrimony, unsubstantiated allegation and heresay abound.

    Me and another have taken it upon ourselves to contact all members, appeal for a postponement of the vote and offered our respective skillsets (internal auditing and accounting) to undertake an inquiry to establish facts and report findings to enable members to vote from a properly informed position at a reconvened EGM.

    The current committee has accepted our proposal. The hostile group has rejected our proposal.
    However, without requesting responses, we've been overwhelmed by emails from ordinary members in support of our proposal to postpone the vote and for us to undertake our proposed inquiry.

    Due to Covid preventing attendance by members at the meeting on Tuesday proxy voting opens tonight for 24 hours in accordance with the Articles.
     
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    In the end it is possible for these things to end up in court. There are an interesting number of precedents relating to this sort of thing. However, it is best to try to find some way in which people will co-operate. However, it reads to me (remembering we are only seeing part of the information) that an AGM is needed to elect the committee. It does not read that the committee can be removed without that although it would be possible to add more members through a resolution at the general meeting.

    Lots of possibilities to argue about this.
     
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    prophet01

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    ...Lots of possibilities to argue about this.

    Indeed so.

    Hopefully our intervention has stirred the ordinary membership out of their usual torpor and they will vote in their masses to temporarily retain the status quo so that we're able to undertake our proposed inquiry which the current Committee has pledged to authorise immediately should the resolution to remove them be rejected.

    They've also pledged to convene an AGM once our inquiry is concluded and the findings issued to the membership. The membership will then have an opportunity to vote for a new committee from an informed position.
     
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    eteb3

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    You haven't said whether a 'committee member' is a company director, but I think we can infer they are.

    In which case the resolution to remove them must (absent other provisions in the articles) follow the statutory procedures in the Companies Act.

    Does it? If not, you can probably expect more acrimony as the legitimacy of the vote (whichever way it goes) can be argued.

    @The Resolver is the best person to comment on the status of the existing directors who may not have been validly appointed. I keep looking at the Duomatic principle, which may suggest that if 'committee appoints then notifies' has been long usage without objection, those appointments may be valid in spite of the articles. Lord Neuberger: "The essence of the Duomatic principle... is that [the requirement to decide by a vote at a meeting of the company's members] can be [set aside] if all members of the group... either give their approval to that course, or so conduct themselves as to make it inequitable for them to deny that they have given their approval." But I'm grateful to the Resolver for putting me right on a previous occasion where I thought Duomatic applied.

    It should go without saying that volunteer committees everywhere should sleep with the articles under their pillow, or this sort of thing is eventually bound to occur. I like your proposal to delay and investigate: sounds very much more grown-up than you often see in these situations.
     
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    prophet01

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    @eteb3
    Yes, committee members are company directors.
    There has been no objection raised, by any member or the current Committee, to the resolution and convening of this EGM by the hostile members group. Proxy voting will open at 6:00pm today and close at 6:00pm tomorrow. The actual, physical EGM will be convened at 6:00pm on Tuesday with a limited number of participants due to Covid 19.
     
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    eteb3

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    There has been no objection raised, by any member or the current Committee, to the resolution
    The objection I meant was an objection by the activist faction to the apparently invalid appointment of the directors: if there's been no objection, it may be that the current committee can be held to have been validly appointed. Or is the validity of their appointment not the point at issue? (ie, they were appointed by the previous committee, not by the membership as the articles require)

    Proxy voting will open at 6:00pm today and close at 6:00pm tomorrow. The actual, physical EGM will be convened at 6:00pm
    I'm absolutely not sure about this, but I think that may be an invalid procedure as you have to be able to nominate proxies in the final 24 hours before the vote. But that may be for traded companies only.

    I am much surer of this: if the substance of the resolution is to remove directors (we can infer, directors who have been validly appointed), then such a resolution must be preceded by special notice. Special notice is detailed in s. 312 CA 2006.
     
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    KAC

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    @KAC
    Nah. Not trying to upset the applecart. That's just a natural consequence of simply questioning.

    The company is limited by guarantee. Members do sign up to being a "member" when they join and are entitled to vote at any general meetings.

    Circumstance is that a group within the club has legitimately convened an EGM in a hostile bid to take control of the Committee, hence the whole club. The resolution is to remove the entirety of the current committe and to install their placemen. Acrimony, unsubstantiated allegation and heresay abound.

    Me and another have taken it upon ourselves to contact all members, appeal for a postponement of the vote and offered our respective skillsets (internal auditing and accounting) to undertake an inquiry to establish facts and report findings to enable members to vote from a properly informed position at a reconvened EGM.

    The current committee has accepted our proposal. The hostile group has rejected our proposal.
    However, without requesting responses, we've been overwhelmed by emails from ordinary members in support of our proposal to postpone the vote and for us to undertake our proposed inquiry.

    Due to Covid preventing attendance by members at the meeting on Tuesday proxy voting opens tonight for 24 hours in accordance with the Articles.
    I used to do a bit of forensic accounting and all I can say is good luck. Certainly developed from your opening post :)
     
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    prophet01

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    @eteb3
    Apologies. Missed your post.

    To clarify, the hostile group's motivation for attempting to remove the current Committee is unrelated to any potential invalid appointment.

    My reasons for asking the initial question was in relation to a potential damage limitation strategy in the event that the current Committee were removed by the EGM or resigned in advance of it.

    Our Articles are clear in regard of the timing and period for the proxy vote.
    I wasn't aware until yesterday about the special notice requirements, as you highlight, for resolutions to remove directors.
     
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    As to eteb3's useful reference to the Duomatic Principle, are you sure the appointments were indeed solely made by the Committee or do you think they may have been formally endorsed by reappointment at the AGM's. Take a look at the Minutes of the last AGM. In effect were they recommended by the existing Committee and always endorsed at the AGMs? If the date of appointment of committee members coincides with the dates of the AGM then this will be the argument for lawful appointment making Duomatic redundant.

    The term 'committee members' has no special status in company law (just as an employee termed 'Sales Directror' may not sit on the Board) and so appointment is regulated solely by the Articles (in this case then up for annual reappointment by majority vote of all members) with no requirement for Special Notice . However those, and this would seem to be all, of the Committee Members who happen to also be shown at Companies House as Directors, cannot have that power and role removed save after Special Notice (28 days). I imagine this has never been a problem until now.

    Additionally. there is no power anyway to remove Committee Members at an EGM but simply to not vote them back on at the next AGM. But even after removal they still remain directors until removed at a members meeting for which 28 days Special Notice was given.

    Final point as to Duomatic, if the committee members were not shown in the Minutes of the AGMs as being reappointed/appointed according to the wishes of the Committee, then a Duomatic argument may still fail if members would say that, had they considered the point, they would assume that everybody simply approved automatically the Committee's recommendations for reappointment at the AGM in accordance with the Articles . For Duomatic to work I would imagine there would have to be evidence of a clear agreement by all members (note "all") to ignore the Articles. I;m not sure such would be so clear cut with this company, On a practical level would anyone be prepared to spend the significant legal costs in mounting a Duomatic challenge?

    Coincidentally I am giving the first presentation at next Month's Annual Conference of the Civil Mediation Council which will be immediately after the Keynote speech by...Lord Neuberger. Ordinarily that might have given me an opportunity to 'chat' but sadly, thanks to Covid-19 , it will all be online.
     
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    prophet01

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    @The Resolver
    Appreciate the in depth post, most informative. I'm certain that all the appointments were made purely by Committee decision mid-term wthout prior endorsment at any AGM. However, as I stated earlier, my initial query and the driver of the hostile take-over bid is unrelated to this issue.

    What has expecially piqued my interest in your post is your statement:
    "there is no power anyway to remove Committee Members at an EGM but simply to not vote them back on at the next AGM"
    Is this absolutely the case? If so then does it invalidate the resolution to remove the current Committee and replace them with other named members?

    Further Clause 12 of our Articles, Disqualification and removal of Committee Members, sets out five circumstance which require a Committee Member (Director) to vacate their office.

    (a) he/she ceases to be a Committee Member by virtue of any provision of the
    Act or pursuant to these articles or he/she becomes prohibited by law from
    being a Committee Member; or

    (b) he/she becomes bankrupt or makes an arrangement or composition with
    his/her creditors generally or applies to the court for an interim order
    under s.253 of the Insolvency Act 1986 in connection with a voluntary
    arrangement; or

    (c) he/she becomes incapable by reason of illness or injury of managing and
    administering his/her property and affairs; or

    (d) he/she resigns his/her office by notice sent to or left at the office; or

    (e) he/she is absent from meetings of the Committee on three consecutive
    occasions without the permission of the Committee, and his/her alternate
    (if any) does not attend in his/her place, and the Committee resolves that
    his/her office be vacated.
    None of the above requires them to vacate their office following a vote to remove them at an EGM which suggests to me that they cannot be removed in this manner.

    Is my rationale sound?
     
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    @The Resolver

    What has expecially piqued my interest in your post is your statement:
    "there is no power anyway to remove Committee Members at an EGM but simply to not vote them back on at the next AGM"
    Is this absolutely the case? If so then does it invalidate the resolution to remove the current Committee and replace them with other named members?

    OK- so here's a typical lawyer's reply:-

    On the one hand, if, as I assume is the case, Committee Members are shown as Directors, then as it is the latter role that holds the real power, such cannot be taken away from them without the normal rules applying (Special Notice of 28 days to the Board and normal notice to Members of a meeting (14 but 21 If its an AGM) ). So far as the status of "Committee Member" is concerned the Articles do not give that power save at he AGM, which automatically remove if not voted back on..

    On the other hand as company law (rather than the content of Articles of Association) does not recognise the term "Committee Member" in the sense of attributing powers and rights specifically to anyone appointed under that title the Members could pass Resolutions to remove that title to any Member. But they remain a Director and entitled to attendance at meetings of the committee and to information available to the committee.

    In other words - its complicated! I would need to see the whole set of Articles and relevant past Resolutions

    Ultimately what will happen will depend on the views of the majority.
     
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    I think I should make a further comment to help confuse even further. Company law takes precedence over the Articles of Association save when a provision in the Companies Act 2006. states "subject to the Articles of Association".
     
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    prophet01

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    @The Resolver
    Your input is certainly making me focus more intently on the relationship between Article clauses.

    From the Articles:
    1. Definitions and interpretation
    1.5 "Committee" means the board of directors of the Company from time to time or a
    properly constituted committee thereof;

    1.6 "Committee Member" means a director of the Company from time to time;
    and, the EGM resolution states:
    The business of this meeting is as follows:
    1. To vote on the removal from office of the following committee members/board directors: [Named list of all seven]

    2. To vote on the proposed election of the following members as directors to the club committee/board of directors: [Named list of four]

    This then clarifies and confirms that any reference to the Committee/Committee Member is reference to the board of directors/director.

    Does the above alter or confirm your view of matters?
    Are you able to provide a view as to my query "is my rationale sound?" at post #20?
    Thanks.
     
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    prophet01

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    The above's been an informative discussion, unlike at our club in recent weeks.
    I'll report back the outcome of the EGM.

    Notification of EGM vote:
    The results are that the Resolution was carried by:

    165 votes FOR, and
    78 votes AGAINST

    This means that the previous Committee has been removed from office and the following members have been elected to the board: [Named four members]
     
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    eteb3

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    None of the above requires them to vacate their office following a vote to remove them at an EGM which suggests to me that they cannot be removed in this manner.
    My take: I think you're right, and none of those articles permits removal of directors as contemplated by the resolution.

    But
    Company law takes precedence over the Articles of Association save when a provision in the Companies Act 2006. states "subject to the Articles of Association".
    and per Companies Act 2006 s. 168, by ordinary resolution at a meeting for which special notice was given (see above), directors can be removed notwithstanding the articles. See here.

    Too late now, but I see there is a right for directors to be heard and to circulate their defence against removal to the members of the company (s. 189).

    Assuming you're going to take the resolution as having duly removed and appointed directors, you might like to draw attention to the provisions of s. 168 regarding the terms of office of those appointed at the meeting.
     
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    What were the periods of time when notices were given , one from a shareholder(s) to the Board requesting they convene a meeting to remove named directors and the notice to all members of the holding of that meeting (EGM)? Did the notices name the committee members/directors to be removed and inform then of their right to attend to give reasons not to remove them? Did the Board circulate to all members any arguments for non-removal put forward by any or all directors.
     
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    prophet01

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    Evening all.
    Apologies for the delay in responding.

    @eteb3
    I concur with your assessment. The removal of the Directors in this fashion appears to have been made legitimate as per the Companies Act clause you referenced.

    @The Resolver
    The administration of the EGM appears to have been sufficiently compliant with the requirements of the Act in respect of notice periods etc. as you queried.

    What sits uncomfortably with not only me but many other members, from whom we received so many emails of support prior to the EGM for our eminently pragmatic, reasonable and equitable proposal to postspone the EGM, undertake an independant review of the unsubstantiated allegations [made against the Committee] and issue our findings to enable members to make an informed decision at a proposed re-convened EGM, is the basis for the rejection of our proposal by the hostile group .

    The basis being that independant mediation had already been undertaken by an "eminent" member whom they'd requested to act as an "independant intermediary" between them and the Committee some months ago. That "independant mediator" is now the new club Chairman; one of the four "placemen" new directors who make up the new Committee.

    Only 5 days before the vote a 17 page statement, presumably drafted by this "independant intermediary" in support of the resolution, was issued to members. It was, in essence, a diary of the purported mediation events over the previous few months but was, and is, quite clearly a wholly unbalanced perspective favouring the hostile group in addition to making further negative allegations without providing substantiation. This left little time for the Committee, who are all volunteers with day jobs, to draft and issue a suitably persuasive rebuttal nevermind refutation. "No smoke without fire" & "mud sticks" etc.

    Whilst accepting of the majority vote I'm wholly dismayed that so many members made a decision of such consequence in the knowledge that they were so woefully uninformed of the facts or the truth and that they were offered an opportunity to be made informed.

    It remains our intention to unearth the truth with or without (expectedly) the co-operation of the new Committee.
     
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    prophet01

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    @KAC
    As I'm not an accountant I'm very interested to understand what you mean by "an audit is not a forensic investigation". It would also be of interest to have your view, obviously based on the thread content, of how you see our "specific issues".

    Our "intention to unearth the truth" is in respect of;
    • the historical and future projected financial standing of the club in light of the loss of members due to Covid restrictions. The previous Committee concluded that the club's largest overhead, manager's and assistant manager's salaries had to be reduced. This was, of course, resisted by the two, and was essentially the catalyst of the confrontation.
    • the numerous allegations, including of misconduct and of financial irregularities, made by both the hostile group (in support of the two staff) and the previous Committee.
     
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    Scalloway

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    what you mean by "an audit is not a forensic investigation".

    The phrase I remember from my student days is "an auditor is a watchdog, not a bloodhound". A charity I am a trustee of had an audit recently. The work was done entirely by email. They went into gteat detail for our financial procedures but they did not try to trip us up.
     
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    KAC

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    Sorry @prophet01 but this is out of my current skillset as although I was a Registered Auditor, I retired from practice some years ago.

    I can confirm that an audit is basically carried out to ensure that, in the opinion of the auditor, the accounts do not contain any MATERIAL misstatements. The Companies Act requirement only refers to future audits as it must be served at least one month prior to the end of the financial year.

    An audit is a relatively cheap procedure and not intended as a 100% verification of the transactions included. There would be no need for the auditor to engage with the members while performing the audit and the audit of a sports club, were it performed, be carried out by a relatively junior member of staff under supervision of a Registered Auditor.

    Litigation is expensive and, so far as I am aware, there are no provisions for the members to require that the Directors instruct Forensic Accountants to carry out detailed review of the Company's financial transactions. Any review would not be inexpensive.

    Not sure where you can go from here without incurring substantial costs by court action. Maybe @The Resolver can suggest?

    Sorry I can't be of more help.
     
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    prophet01

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    @KAC
    Appreciate the input from you and the other posters.

    Our intention is to work within the club to unearth the truth. The new Committee has been installed by majority vote but there remains a significant minority who remain dissatisfied with why and how that came about.

    The new Committe are accountable to members and they will have to respond to our reasonable questions concerning events surrounding the takeover. Any refusal to do so will be seen as deliberate obstruction and viewed with suspicion by many. That will open up further possibile avenues to apply pressure. Not least that they are obligated to resign at the next AGM, which must happen in the next couple of months regardless, and must stand for re-election should they wish to continue in post.
     
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    Unfortunately an audit is not a forensic investigation and would not necessarily address your specific issues. And it only applies to future accounts and not past accounting periods
    It does apply to the past. Specifically It applies to a specific accounting year with the notice requiring the audit being served before the end of the 11th month of that accounting year. The only future period will be the months following the date of the Notice.
     
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    What action to take depends on the nature of the financial irregularities. Were these payments out of the club accounts for expenses personal to the officer and not genuine expenses of the club? In f case the others may see this thread you may wish to explain to me in confidence by private message/email.

    I was interested to read the references to 'mediation'. Is this a requirement in the Rules or Articles.?If so, the core element of mediation is that it is conducted by someone who is entirely neutral and independent of the club and its officers/committee members.
     
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    KAC

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    It does apply to the past. Specifically It applies to a specific accounting year with the notice requiring the audit being served before the end of the 11th month of that accounting year. The only future period will be the months following the date of the Notice.
    I may not have made it clear enough. The notice by 10% of the members requiring an audit can only apply to the current financial period and that notice must be served at least one month before the end of that financial period and consequently cannot apply to retrospective financial periods
     
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    prophet01

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    @The Resolver
    Your offer of a private discussion is most appreciated.

    My reference to "financial irregularities" was in connection with accusations made, by both sides, of nepotism. Perhaps "financial irregularities" was the wrong term to use though they do involve financial gains. Regardless, these are serious accusations which must be addressed. I suspect that the new Committee (and their backers) would be quite happy for all to be forgotten.

    I only used the term "mediation" as this was the basis for the hostile group's reasoning for refusing to accept our offer to undertake an independant inquiry.
    ...What sits uncomfortably with not only me but many other members, from whom we received so many emails of support prior to the EGM for our eminently pragmatic, reasonable and equitable proposal to postspone the EGM, undertake an independant review of the unsubstantiated allegations [made against the Committee] and issue our findings to enable members to make an informed decision at a proposed re-convened EGM, is the basis for the rejection of our proposal by the hostile group .

    The basis being that independant mediation had already been undertaken by an "eminent" member whom they'd requested to act as an "independant intermediary" between them and the Committee some months ago. That "independant mediator" is now the new club Chairman; one of the four "placemen" new directors who make up the new Committee.

    Only 5 days before the vote a 17 page statement, presumably drafted by this "independant intermediary" in support of the resolution, was issued to members. It was, in essence, a diary of the purported mediation events over the previous few months but was, and is, quite clearly a wholly unbalanced perspective favouring the hostile group in addition to making further negative allegations without providing substantiation. This left little time for the Committee, who are all volunteers with day jobs, to draft and issue a suitably persuasive rebuttal nevermind refutation. "No smoke without fire" & "mud sticks" etc...

    There is no mention of mediation in the Articles.
     
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