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Bankruptcy and Social Clubs – Am I liable for the debts of the Society?

I am a member of a social club that is owned by the members. It is £73000 in debt and has to close. If the club declares bankruptcy am i liable for anything?

That really depends on the structure of the club and what category it is listed as. For example, is it a Friendly Society? And are you a Trustee? In a recent court case, the Judge declared that all members of social clubs might be personally liable, though this was not further defined. We would have preferred to have given you a black or white answer, but even a call to the Insolvency Service was inconclusive – and they have former Official Receivers working there! If you let us have a copy of the Articles of Association, we might be able to tell you more, but without further information we would be guessing.

For those considering forming social clubs at any time in the future, you might wish to consider registering the club as a limited company – consider these points:

* Form a company limited by guarantee.

* The new company would then need to register as a charity in its own right. (Registered charity status cannot be transferred

from the existing charity.)

* Transfer all assets, contracts, employees and liabilities from the organisation to the new company. This can be done at any

time, but is usually best if it coincides with the end of an accounting period, for example, year end or month end.

* The new limited company would then take over the activities and responsibilities of the old organisation.

Benefits of registering the social club as a limited company:

· criminal prosecutions are most likely to be made only against the company, not the charity’s members or trustees.

· the company is recognised as a legal entity, separate and distinct from its members, and may hold property of all kinds in its corporate name (i.e. not in the names of the individual directors/trustees)

· it avoids the expenses involved in the formal appointment of, and transfer of property to, charity trustees in the future

· the company may enter into contracts and be principally liable for losses arising from any contracts entered into, rather than the trustees

· the liability of the members of this company will normally be limited on winding up

· people may be more willing to become trustees of a company, knowing the peace of mind that comes with incorporation.

Bankruptcy UK offers bankruptcy help across the board and will submit your application online. Court appearances for bankruptcy are no longer required. Feel free to call us on 01425 600129 for a chat about your circumstances.


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