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Last Updated: Saturday, 24 February 2007, 13:52 GMT
Warning to club members on debts
By Bob Howard
BBC Radio 4's Money Box

A wallet with money in it
Some club members have already been chased for debts
Members of sports and working men's clubs are being warned they may be liable for debts if their clubs fold.

This is because many are unincorporated and so have no legal entity.

That means if they close owing money, a creditor can go after the individual members and not just the club's assets.

The Working Men's Club and Institute Union has written to more than 1,000 clubs urging them to change their status and incorporate to avoid their members being personally sued.

Kevin Smyth, the general secretary of the Working Men's Club and Institute Union, said members are already acting.

Speaking to BBC Radio 4's Money Box programme he said: "We are concerned. We have written to all our clubs alerting them to the problem and encouraging them to switch.

"Five or six clubs came in today and said yes, can you help change our rules."

Personally liable

Kay Kettle was the treasurer of a social club in Ascot in Berkshire.

Five years ago, the members borrowed 15,000 from Young's Brewery to refurbish it.

When the club closed in 2005, Kay didn't realise that she and the other members would be personally liable to pay back the outstanding debt.

It's made me very wary, I would never join another club
Kay Kettle, former club member

Young's solicitors are trying to get all the members to contribute, but because Kay was a home owner and had been a signatory on the loan agreement, a charge has now been put on her house.

That means, if the other members do not help pay back the 3,000 outstanding on the loan, it will be taken from Kay when her property is sold.

Young's told Money Box its duty is to shareholders and this should serve as a warning to other clubs.

But Kay thinks that is unjust: "It was just a tiny little club that we tried everything possible to keep going. It's made me very wary, I would never join another club."

Sports clubs

Robert Thomas is a partner at RH Jeffs & Rowe which specialises in doing the accounts for sports and social clubs.

He said by the time the members realise there is a problem, it is often too late.

"The problem with many members clubs is they were set up by a group of friends as unincorporated clubs, which means they have no legal status," he said.

"If someone wishes to sue the club they cannot go against the club as a legal entity, they have to sue the individual officers or members."

Money Box has discovered that one former club treasurer in the Midlands is being pursued for almost 40,000.

Sports clubs are also at risk of being sued, although cases so far have been around the issue of personal injuries rather than debt.

The Rugby Football Union estimates that of its 1,200 senior clubs, only around a quarter are incorporated.

It is also about to write to its clubs advising them to consider changing their status.

BBC Radio 4's Money Box was broadcast on Saturday, 24 February at 1204 GMT. It will be repeated on Sunday 25 February at 2102 GMT.

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The BBC's Bob Howard on the warning to club members



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