Dear All,
I am a member of an Investment Club. Currently we have one formal meeting a month and one informal meeting a month and an e-mail newsgroup that we use daily. Currently we only buy and sell at the formal meeting but I would like the club to have the ability to sell shares between meetings using the newsgroup. My suggestion of how it could work is as follows:
1. Selling below a 20 percent profit. If a member wishes to nominate a company for selling they send out an e-mail clearly saying they wish to nominate X company for selling only if the share price stays above XXXp. There is then five days for other members to come back and either agree or disagree. We cannot sell unless at least 50 percent of the total members vote and every single vote has to agree to sell - so any member has the right to veto the suggestion. If we get the required votes within the five days we sell the company. If we don't get the required votes within the five days then we don't sell until we do get the required votes - this could take 10 days or even longer. It would be up to the nominating member to put forward a good enough case for selling. Also, the vote is only valid until the next formal meeting.
2. Selling above a 20 percent profit. If the Ask price of the share (the price we would get if we sold, not the mid price) is above 20 percent, the committee has the option of selling the share. However, every member of the committee has to vote (Alan, Clive, Dougie and I) and any committee member has the right to veto the suggestion.
However, another member has pointed out that these suggestions my be illegal and made the following comments:
Regarding buying and selling through the newsgroup. I have no objection to this being done, but as far as I understand it there are legal reasons which prevent it. I am not saying that these reasons cannot be overcome, but I don't have enough legal knowledge on how it can be done. First of all we are a partnership, covered by the English Law of Trust. Secondly, our
constitution says that the dealing decisions must be made at the normal meetings, and that due notice of such meetings have been given to all members. At this meeting, of which the partner has been given due notice, a majority of the partners can decide to deal in shares. If a partner doesn't turn up, either with or without apologies, they have no right of redress against the club, or any of its officers, provided that the decision has been properly taken and executed. If shares are bought and sold outside of
these criteria, for instance via a newsgroup or the telephone, each individual partner has the right to be consulted and their agreement obtained, and if they aren't consulted, in the event of something going wrong, then they have the right of redress at law. The likelihood of this happening, of course is very small. The only way, at the moment, that I can see of overcoming this, is a: by consulting all members if it is contemplated that a deal be done, and this means contacting them and getting their agreement for the action, in writing, via the newsgroup or b: by
giving some kind of authority at a meeting to allow dealings in certain shares which we own in between meetings, where the price ranges including total expenditure and the companies involved are quantified. This does not mean that the club can deal in shares willy nilly via the newsgroup. In the unlikely event of a dead cert profit-making share suddenly appearing, the
procedure of making sure that every member is consulted and has agreed to the purchase in writing comes into play.
Another alternative would be to re-write a section of the constitution, where we turned ourselves into a virtual club and didn't need to have meetings at all and that all of our business was transacted over the Internet and made the newsgroup the sovereign body. That would be breaking new ground, legally...but I still don't think it would overcome the problem
of consultation, but as I say my legal knowledge is not great enough in this area.
So my question is this. How do other investment clubs sell shares between meetings (if in fact they do). If it has been entered into your constitution would you be willing to let me have a copy? Can anyone suggest a legal solution to this problem.
Any advice will be greatly appreciated.
I am a member of an Investment Club. Currently we have one formal meeting a month and one informal meeting a month and an e-mail newsgroup that we use daily. Currently we only buy and sell at the formal meeting but I would like the club to have the ability to sell shares between meetings using the newsgroup. My suggestion of how it could work is as follows:
1. Selling below a 20 percent profit. If a member wishes to nominate a company for selling they send out an e-mail clearly saying they wish to nominate X company for selling only if the share price stays above XXXp. There is then five days for other members to come back and either agree or disagree. We cannot sell unless at least 50 percent of the total members vote and every single vote has to agree to sell - so any member has the right to veto the suggestion. If we get the required votes within the five days we sell the company. If we don't get the required votes within the five days then we don't sell until we do get the required votes - this could take 10 days or even longer. It would be up to the nominating member to put forward a good enough case for selling. Also, the vote is only valid until the next formal meeting.
2. Selling above a 20 percent profit. If the Ask price of the share (the price we would get if we sold, not the mid price) is above 20 percent, the committee has the option of selling the share. However, every member of the committee has to vote (Alan, Clive, Dougie and I) and any committee member has the right to veto the suggestion.
However, another member has pointed out that these suggestions my be illegal and made the following comments:
Regarding buying and selling through the newsgroup. I have no objection to this being done, but as far as I understand it there are legal reasons which prevent it. I am not saying that these reasons cannot be overcome, but I don't have enough legal knowledge on how it can be done. First of all we are a partnership, covered by the English Law of Trust. Secondly, our
constitution says that the dealing decisions must be made at the normal meetings, and that due notice of such meetings have been given to all members. At this meeting, of which the partner has been given due notice, a majority of the partners can decide to deal in shares. If a partner doesn't turn up, either with or without apologies, they have no right of redress against the club, or any of its officers, provided that the decision has been properly taken and executed. If shares are bought and sold outside of
these criteria, for instance via a newsgroup or the telephone, each individual partner has the right to be consulted and their agreement obtained, and if they aren't consulted, in the event of something going wrong, then they have the right of redress at law. The likelihood of this happening, of course is very small. The only way, at the moment, that I can see of overcoming this, is a: by consulting all members if it is contemplated that a deal be done, and this means contacting them and getting their agreement for the action, in writing, via the newsgroup or b: by
giving some kind of authority at a meeting to allow dealings in certain shares which we own in between meetings, where the price ranges including total expenditure and the companies involved are quantified. This does not mean that the club can deal in shares willy nilly via the newsgroup. In the unlikely event of a dead cert profit-making share suddenly appearing, the
procedure of making sure that every member is consulted and has agreed to the purchase in writing comes into play.
Another alternative would be to re-write a section of the constitution, where we turned ourselves into a virtual club and didn't need to have meetings at all and that all of our business was transacted over the Internet and made the newsgroup the sovereign body. That would be breaking new ground, legally...but I still don't think it would overcome the problem
of consultation, but as I say my legal knowledge is not great enough in this area.
So my question is this. How do other investment clubs sell shares between meetings (if in fact they do). If it has been entered into your constitution would you be willing to let me have a copy? Can anyone suggest a legal solution to this problem.
Any advice will be greatly appreciated.
