Should our club split?
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Should our club split? Gayle Nelson wrote.....
Our investment club consists of 20 members. Half of these
members do not come to any meetings or participate in any way while a few of us
do all the work. We recently decided that all members have to attend one
meeting per year. Since we meet every other month they have 6
opportunities to come to a meeting. Many of them have still not attended
or contributed in any way. What would be the best way to split the club in
half? Should we dissolve the entire club and re-establish with those
members that are involved? Should we buy the non participating members
out? Or could we literally split off and take half the stock with
us?
Non participating members may become a thorn in the side of an
investment club, often leading to frustration for those who are carrying
the load. Having said that, whatever action your club chooses to
employ, that action should be in accordance with your club's partnership
agreement. Let's consider several of the possible courses of action
that you mention...
Dissolve the entire club - while not
terribly difficult, it does take time and effort to form an investment
club. As long as you have a core group of active and interested partners I
would recommend keeping the club intact and getting rid of those who are truly
the dead wood in the best manner possible.
Split the club in half - this would not be very
easy from a logistical or accounting standpoint. Without going to the
extreme measure of selling all the club's assets and splitting the cash in
proportion to ownership of each respective group, the selection, allocation, and
transfer of specific investments would be very burdensome.
Buy the non participating members out -
Obviously, your active members could ante up and invest additional funds
into the club so that the club had ample cash reserves which
could then be used to pay off the non participating members in a
withdrawal. For more information please see the Trez_Talk article titled
'Should one or more members
"buyout" a withdrawing member?' found
at http://www.bivio.com/trez_talk/mail-msg?t=5119000003
The non participating members withdraw from the club
- In my opinion, assuming everything reasonable has been done to
encourage those non participating members to return to an active and
participating role in the club, the best solution is to have each of these
partners withdraw from the club. Your club has more options than you
may realize with regard to paying withdrawing members. Again, please
allow me to point you to another article which addresses this subject in detail.
It is titled 'Member Withdrawals - payout options
for your club' and may be found at http://www.bivio.com/trez_talk/mail-msg?t=2984700003
Thanks for the terrific question!
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