Syndicate Agreement Legal Question

[petem]

I don't understand the point and meaning of the section highlighted below (pasted from the RYA syndicate agreement)....

6. Termination of agreement

6.1 If either of the Parties has reasonable cause or desire to sell his share of the boat and thereby terminate this agreement, he may, by individual notice in writing to the other party, indicate his desire to terminate. Such termination shall take place within six months after the delivery of such notice in writing.

6.2 Upon such notice in writing being delivered, the remaining Parties shall take such steps as may be necessary to secure the execution of a proper release and indemnity against all liabilities contracted by the determining Party and shall arrange to purchase the share of the determining Party at a fair market price or alternatively the determining Party and the remaining Parties shall obtain agreement by another to take on the share of the determining Party. Where another takes on the share of the determining Party it shall be the responsibility of the determining party to pay for any advertising or other such expenses incurred in relation to the sale. The determining Party hereby agrees to defray or settle his share of the disbursements, payments or accounts for the Boat up to and including the date of actual termination as agreed between the Parties which for the avoidance of doubt may be any date within six months of the individual notice in writing being received by the other Party.

Can anyone shed any light on it? What would happen if the selling partner is unable to sell his share within 6 months?

 

[MrB]

I read it as if the seller hasn't sold their share within 6 months of notice given, the other shareholders buy the share. I guess that if the existing shareholders couldn't buy out the leaving party then the boat would get sold .

Could be wrong though, this is JFM territory.

 

[Mr Googler]

I read it the same as MrB.

How do you decide on the value of the share? Only worth what someone is willing to pay etc....

If no one new wants to buy the share....very tricky for other share holders to value it. Did you discuss any of this with your syndicate members beforehand? What happens if etc...?

 

[Portofino]

I read it as if the seller hasn't sold their share within 6 months of notice given, the other shareholders buy the share. I guess that if the existing shareholders couldn't buy out the leaving party then the boat would get sold .

Could be wrong though, this is JFM territory.

+1 it’s a some certainty for existing .There is a timely way out .Not just getting cash ( how ever that’s valued ? ) but freeing from the running costs , money pit ness of boat ownership as well .A clean break effect .

 

[BruceK]

sorry if this is a bit of thread drift, but does a "short term" share (for instance a year or two lease at a time) exist as a sort of cost defray if a full time share doesn't come timeously. (obviously without owner rights etc) I query this as a sort of alternative to charter on a try before you buy type scenario for those looking to transfer to the Med. It's just an idle thought in so far as if I was contemplating a transfer to Med boating it would be a handy step in to make the choice when it's a family rather than personal decision and a boat in the Med makes boat sharing sense to me then. (Own boat locally but shared boat for holidays)

 

[Bouba]

It doesn’t say that the partner should get all his money back. If someone drops out and can’t sell their share in six months, then the remaining partners could buy it for a nominal sum. Which has got to be the ‘fair market price’ of something that incurs continuous costs and can’t be sold in six months. As long as you take on all the running costs.
Once again this is the ramblings of a layman

 

[julians]

How to determine fair market value?

Maybe you get a surveyor to value it?

 

[Bouba]

(Own boat locally but shared boat for holidays)

actually, shared boat locally and shared boat for holiday, also makes a lot of sense.

 

[Grubble]

This is why it always pays to get proper legal advice before signing a contract.

If the other party hasn't already submitted his notice in writing, submit your notice to him in writing first. He'll then have six months to buy your share - problem solved.

 

[Mr Googler]

Surveyor is a good idea for an impartial valuation but a syndicate boat share isn’t worth value of boat divided by shares IMHO.

To me it’s less as I wouldn’t like sharing my boat, having to use mechanic for everything incase i cock up, limited use etc...

To someone else perhaps it’s more for the same reasons above plus divided running costs etc...

That’s why unless someone buys the share.....it’s so hard to value it I reckon.

 

[petem]

Here the two clauses following if that helps...

6.3 If a dispute arises as to the price to be paid to the determining Party for his share then a valuation shall be obtained from a recognised Boat broker and in default of agreement then the entirety of the Boat shall be publicly advertised for sale with notice of time and place for sale being given to both Parties and she shall be sold. Each of the Parties on receiving his share of the purchase money shall execute the necessary Bill of Sale of his share in the Boat to the purchaser and deliver up possession of the Boat. The costs of such sale shall be paid by the Parties according to their respective shares.

6.4 Where it is agreed to terminate this agreement and the Parties have mutually agreed to sell the Boat, it shall then be sold either by private treaty at such price as the Parties may agree or, in default of such agreement, by public auction subject to such conditions as are usual on the sale of such Boats. Each of the Parties shall be at liberty to bid for and purchase the Boat at any such public auction, or to purchase the Boat outright for the price advertised for sale by private treaty.


Note that we're not in any dispute or anything like that!

 

[petem]

Surveyor is a good idea for an impartial valuation but a syndicate boat share isn’t worth value of boat divided by shares IMHO.

To me it’s less as I wouldn’t like sharing my boat, having to use mechanic for everything incase i cock up, limited use etc...

To someone else perhaps it’s more for the same reasons above plus divided running costs etc...

That’s why unless someone buys the share.....it’s so hard to value it I reckon.

It's actually quite often the other way around, i.e. the sum of the shares is greater than the value of the whole boat. Indeed, I know people who have bought a boat and have sold shares at such a value they recoup all their costs and still retain a share. But I appreciate that boat sharing isn't for everyone.

 

[petem]

sorry if this is a bit of thread drift, but does a "short term" share (for instance a year or two lease at a time) exist as a sort of cost defray if a full time share doesn't come timeously. (obviously without owner rights etc) I query this as a sort of alternative to charter on a try before you buy type scenario for those looking to transfer to the Med. It's just an idle thought in so far as if I was contemplating a transfer to Med boating it would be a handy step in to make the choice when it's a family rather than personal decision and a boat in the Med makes boat sharing sense to me then. (Own boat locally but shared boat for holidays)

Bruce, I have occasionally seen people selling a share of a season's use for a corresponding contribution of the running costs.

 

[Bouba]

Here the two clauses following if that helps...

6.3 If a dispute arises as to the price to be paid to the determining Party for his share then a valuation shall be obtained from a recognised Boat broker and in default of agreement then the entirety of the Boat shall be publicly advertised for sale with notice of time and place for sale being given to both Parties and she shall be sold. Each of the Parties on receiving his share of the purchase money shall execute the necessary Bill of Sale of his share in the Boat to the purchaser and deliver up possession of the Boat. The costs of such sale shall be paid by the Parties according to their respective shares.

6.4 Where it is agreed to terminate this agreement and the Parties have mutually agreed to sell the Boat, it shall then be sold either by private treaty at such price as the Parties may agree or, in default of such agreement, by public auction subject to such conditions as are usual on the sale of such Boats. Each of the Parties shall be at liberty to bid for and purchase the Boat at any such public auction, or to purchase the Boat outright for the price advertised for sale by private treaty.


Note that we're not in any dispute or anything like that!

It seems the agreement is written for the benefit of the individual shareholder and not for the benefit of the syndicate.
The only person to do well will be the first person out

 

[petem]

Thanks all. Reading your comments in laymans language if one party wishes to sell his share then the other parties must agree to buy it or the selling and remaining parties look for a new buyer. If a new owner can't be found then the whole boat is then advertised for sale. That way, a partner isn't trapped into the syndicate.

Does that sound correct?

 

[MrB]

Thanks all. Reading your comments in laymans language if one party wishes to sell his share then the other parties must agree to buy it or the selling and remaining parties look for a new buyer. If a new owner can't be found then the whole boat is then advertised for sale. That way, a partner isn't trapped into the syndicate.

Does that sound correct?

Yup :encouragement:

 

[jimmy_the_builder]

BCU will give you a trade value for the boat (ie the value at which they would buy it in) which would be a reasonable valuation for the purposes of forced sale to the remaining partners.

 

[jfm]

Pete all 4 clauses are pretty much the worst contract drafting you’ll ever see. They are incompetently drafted and RYA should be ashamed if that’s the model contract they suggest (is it?).

The actual meaning is anyone’s guess. Such is the crumminess of the drafting. It says that at 6 months the agreement is terminated, in which case you would own a boat in shares but have no sharing agreement anymore because it terminated. Ffs! The writer has mixed up the concept of the boat share terminating (which the leaver wants) with the agreement terminating (which no one wants, until the boat is long gone).

It looks like the writer was maybe trying to say that the remainers buy the leaver’s share at 6 months, at fair price (!) but if they don’t want to then the whole boat is sold without any specified time limit. But the words don’t actually say that.

I have by no means listed in this post all the defects in the clauses. You’re going to have to agree something new between you. 6 months for the leaver to sell his share, followed by the whole boat being sold, feels sensible to me.

 

[rafiki_]

Thanks all. Reading your comments in laymans language if one party wishes to sell his share then the other parties must agree to buy it or the selling and remaining parties look for a new buyer. If a new owner can't be found then the whole boat is then advertised for sale. That way, a partner isn't trapped into the syndicate.

Does that sound correct?

I read it that the party wishing to leave the syndicate has 6 months to sell their share, and covers the cost of that sale. If the share not sold in 6 months, then the other 2 parties buy the share or if they don't want to do this, the boat is sold and the 3 parties share the sale proceeds.

 

[petem]

Pete all 4 clauses are pretty much the worst contract drafting you’ll ever see. They are incompetently drafted and RYA should be ashamed if that’s the model contract they suggest (is it?).

The actual meaning is anyone’s guess. Such is the crumminess of the drafting. It says that at 6 months the agreement is terminated, in which case you would own a boat in shares but have no sharing agreement anymore because it terminated. Ffs! The writer has mixed up the concept of the boat share terminating (which the leaver wants) with the agreement terminating (which no one wants, until the boat is long gone).

It looks like the writer was maybe trying to say that the remainers buy the leaver’s share at 6 months, at fair price (!) but if they don’t want to then the whole boat is sold without any specified time limit. But the words don’t actually say that.

I have by no means listed in this post all the defects in the clauses. You’re going to have to agree something new between you. 6 months for the leaver to sell his share, followed by the whole boat being sold, feels sensible to me.

Thanks. Jez has some alternative words that Ian Collett drafted so I'll have a look at them and see if they make any more sense. I agree that the intent is reasonable.