What legal documents do we need?

Partnership agreement

Assuming your club decides to operate as a partnership, you should have a written partnership agreement setting out the terms and conditions under which the club will operate. This agreement is the foundation of your club. It sets out the basic principles of the club, stating the reason the club was formed and the broad basis of its operations. The agreement should cover such things as the investment approach your club will take, how profits and losses will be shared, the voting system your club will use, how club officers will be appointed and so on.

  • You can use a solicitor to draw up a partnership agreement. Alternatively, you can draft your own agreement. The partnership agreement template (RTF 76.6KB) will give you a basis for getting started, and includes many of the considerations when entering into a partnership agreement.
  • Many investment clubs overseas also use the term ‘Partnership Agreement’. Sometimes, however, you may find this document referred to as the ‘Club Constitution’. The important point is that this document is the founding blueprint of the club. Its terms should only be changed in extraordinary circumstances, and after serious consideration. Many clubs specify that unanimous agreement is required in order to make such a change.
  • The partnership agreement does not have to be officially "lodged". It can be kept at the club’s accountant’s office if your club has one. Make sure all partners have their own copy of the agreement.

Rules of the club

A second document is usually also required. This is often referred to as the "Rules of the club’, but may also be known as ‘Operating Procedures’ or ‘Club By-Laws’. While the partnership agreement represents the foundation of your club, the rules set out the procedures by which you run the club from day to day. The rules are more flexible and may be changed from time to time, for example to alter the amount of monthly contributions or change the frequency of club meetings.

  • The Partnership Agreement might state: ‘Partners make contributions to the partnership on the date of each periodic meeting, in such amounts as the partnership shall determine’. The Club Rules would specify what that amount is, any monthly amount for administration expenses, any fee for late payment of subscriptions, and so on.
  • There is no hard and fast rule about what should be included in the Partnership Agreement as opposed to the Rules of the club. One club may specify in the Partnership Agreement what the club may invest in (for example, ‘securities in the S&P/ASX 200 Index at the time of purchase’); while another may take a broader approach (‘invest in securities as prescribed in the Club Rules’). The second approach makes it easier to change the permitted investments at a later date, as additions or deletions are more easily made to the Rules.
  • Some clubs may specify the amount of monthly contributions in the Partnership Agreement, taking the approach that the level of financial commitment is a basic characteristic of the club, and that any change to the level of this commitment is a fundamental change to the club’s operations.

Ultimately it is a matter for each club to decide what should be included in the Partnership Agreement, and what should be specified in the Rules.

Next topic:  Conducting organised meetings