Richmond Yacht Club (Inc)

(“RYC”)

Opinion on proposal for RYC to make provision for significant future capital expenditure.

Presented by:                Donald Webster (RYC Honorary Solicitor)

PROPOSAL

The proposal is for RYC to establish a fund (“Fund”) to provide money that will enable RYC to finance significant future capital investments which could include building a new clubhouse at some point in the future.  

I have considered the draft document headed “Discussion Paper – December 2024” prepared by members of RYC’s committee.

STRUCTURE

I have been asked to write an opinion on what legal structure RYC should use to establish and run the Fund.

Option 1. – Trust.

I have considered using a trust.  The trust would be a separate legal entity from RYC.  RYC is an Incorporated Society.  A trust would be set up using a Trust Deed as a foundation document on its establishment.  The deed would establish rules, procedures and guidelines for how the Fund is to operate.  The Trust would need to appoint Trustees.  Those Trustees would be responsible for attracting fundraising, investing the money and overseeing the use of the money.  Trustees have legal obligations pursuant to the Trusts Act 2019 (“the Act”).  The Trust would be subject to the provisions of the Act.

Option 2. – Endowment Fund.

I have also considered using an endowment fund.  This is common overseas where it is used to fund special projects for not-for-profit entities.  Under this structure, the Fund would be held within the confines of the legal entity of RYC as an incorporated society.  It would operate a separate bank account from RYC’s usual accounts and be subject to different rules from RYC’s usual banking mandates.  The only documentation required to set up an endowment fund would be a resolution of the committee setting the Fund up.  That resolution would set out in some detail all the rules, procedures and protocols of the operation of the Fund.  It would identify sources of revenue and funding, how it is to be invested and what the Fund could be used for.  It is common in other jurisdictions for guardians to be appointed to regulate the use of the Fund.  These guardians would oversee the operation of the Fund and approve any suggested expenditure.  I would recommend that this fund have at least 3 guardians and include in their makeup at least one but maybe 2 “ex-officio” people, such as the current and/or immediate past commodores and another club member (or more) who has a fiduciary background such as a lawyer or accountant.  The guardian who is not “ex-officio” should be elected at an AGM.

Preferred Option.

In my opinion, an endowment fund is the better of these 2 options.  It does not require the establishment of a new legal entity and does not expose any member or other person who is a trustee to the rigors of complying with the Trusts Act 2019.  We already have a legal entity, in the RYC’s incorporated society, that can do the job just as well.  We may well find it difficult to recruit trustees because of the now quite onerous legal obligations and liability on trustees under the Trusts Act 2019.  On the other hand, guardians do not have those legal obligations.  They still do have fiduciary obligations as anyone does under general law who is in charge of another entity’s money.

Dated 10 January 2025

Donald Webster

Honorary Solicitor to RYC