An introduction to members' clubs

10/10/2011

By Josephine Willoughby, Partner in Commercial Property & Development.

Members' clubs are managed by their members. The nature of the business that each such club transacts differs in essence from that of other licensed premises because each time the members of a members’ club are supplied with food, drink or other services, no sale is deemed to have taken place. Instead, the members are effectively paying for a share of the stock collectively owned by the club’s members.

Whilst members’ clubs, like any other commercial enterprise, should do their utmost to maximise their profits, any financial surplus that arises from the business of the members’ club is not treated as profit, and thus is not liable to corporation tax.

Members’ clubs are most commonly either unincorporated associations or Industrial and Provident Societies (IPS).

Unincorporated associations are groups of individuals. The real and personal property of such clubs vests in its appointed trustees. Trustees should only act with the authority of the club’s committee or by resolution of the members in accordance with the club’s adopted Rules.

Trustees of unincorporated associations are personally liable for any debts incurred by the club, such as loans taken out with breweries, the salaries of the club steward, any rent that may be payable for the club’s premises etc. The trustees are entitled to an indemnity from the members of the club, usually to the extent of the value of the club’s property.

Each time that new trustees are appointed, the real property of the club must be transferred into the names of those new trustees. This can be a time consuming and expensive procedure and sometimes the appointment of a corporate trustee may be advisable.

IPS are corporate bodies with limited liability. They are administered by the Financial Services Authority, Mutual Societies registration department.

Shares in an IPS are restricted to one per member of the club and are non transferable.
Like unincorporated associations, IPS clubs hold the club’s property in accordance with the club’s rules.