lw395
Well-Known Member
Yes, your 'money pit' phrase had a certain resonance...
Syndicate Agreement Legal Question
- Thread starter petem
- Start date
Yes, your 'money pit' phrase had a certain resonance...
bluetooth
Well-Known Member
Sounds very useful solution. been interesting thread. Hope you get a satisfactory and agreeable outcome Pete.
petem
Well-Known Member
Thanks, it's not really a contentious thing, more improving clarity and robustness of the words.
petem
Well-Known Member
As you might say, 'if you want to get to there, I wouldn't start from here'.
Before going into any contract it's important to know (a) what you want to get out of it and (b) what your exit looks like. If your answers are (a) happiness and (b) don't be so negative, then you will either get lucky or you won't.
The first difficulty with the quoted wording is that it's not aimed at giving anyone what they actually want.
The second difficulty is the portmanteau phrasing. There are so many conflicting ideas rubbing up against each other that it really is anyone's guess what it means. One idea per sentence, please.
Apart from that critique, I agree entirely with jfm. It's a fairly damning indictment that we are on #30 and all of us above average intelligence.Yet no-one knows what this means.
If it's not too late, I would be tempted to go back to the syndicate and design a clear exit so that, if anyone wants out, they actually know what is possible and how to achieve it.
Mind you, if you really want obscurity and obfuscation you could always try exiting a family trust over French real estate. Suffice it to say I have the t-shirt. It says 'Speak to me, Goose' on the front.
Thanks. Working in IT I'm more comfortable with flow charts so that's where I'll start. I/we can then look at the drafting to reflect the logic.
petem
Well-Known Member
Having read all the comments above, particularly those of Porto's and others with regard to not getting trapped, this is what I think the process should look like...
Any comments before I attempt to turn this into some clauses?
Any comments before I attempt to turn this into some clauses?
TheOrs
Well-Known Member
Do the remaining members have any say in who the exiting member sells to? (Can exiting member sell to a known complete git?)
Portofino
Well-Known Member
I think in an ideal world , if it’s worth trying to aspire to ? ——- . For certainty of ALL ( wether a member takes up the usage or not) there should be a minimum “ buy in time “ agreed before the syndicate forms .
Say a not unreasonable 3/5 years .
In this period nobody can get out .
This ensures there’s certainty of 3 / 5 years “ as is “ for enjoying the experience.
Furthermore to lock a potential “ cocker offer “ in the members put a rough projected running share up front in an escrow account during this period .Mooring and est maintenance/ service agreed projections .
After the “ initial period “ ( agreed at the onset ) then the RYA normal get out contract clauses are fine , or any other get out .
But as said the getter outer needs certainty that after he has served his pre agreed notice that’s it - out - finish .
A trade price pro rata price should suffice.
Or just dissolve it after the pre agreed time 3/5 years .Sell up and divi up .
Some may enter into another similar time limited agreement with a updated boat , others may walk away and do something ( boaty ) different .
The thing is this way there s a known protection period for those who like the status quo and a known end time together.
Say a not unreasonable 3/5 years .
In this period nobody can get out .
This ensures there’s certainty of 3 / 5 years “ as is “ for enjoying the experience.
Furthermore to lock a potential “ cocker offer “ in the members put a rough projected running share up front in an escrow account during this period .Mooring and est maintenance/ service agreed projections .
After the “ initial period “ ( agreed at the onset ) then the RYA normal get out contract clauses are fine , or any other get out .
But as said the getter outer needs certainty that after he has served his pre agreed notice that’s it - out - finish .
A trade price pro rata price should suffice.
Or just dissolve it after the pre agreed time 3/5 years .Sell up and divi up .
Some may enter into another similar time limited agreement with a updated boat , others may walk away and do something ( boaty ) different .
The thing is this way there s a known protection period for those who like the status quo and a known end time together.
MrB
Well-Known Member
Do the remaining members have any say in who the exiting member sells to? (Can exiting member sell to a known complete git?)
I have thought this all along, the new share owner could be such an ar5e you wouldn't even want to deal with them but have no choice! How do you know they have the money or the will to spend on maintenance, insurance, berthing?? Nightmare!!! When the three of you purchased the boat it was easy but to add another unknown? The new share owner could have purchased the share at a very cheap rate and force you to sell at a megga loss also! It would be easier if you owned the boat outright and sold the shares. The contract you have isn't worth the paper it's printed on as pointed out by JFM. I guess that is the worse case scenario and all the players are mates in the syndicate but I would strongly advise getting a better contract before you take on another.
Your second box in the flow chart is floored also, why would one of the remaining owners want to own two thirds of a boat? Two thirds of all the running costs? :ambivalence:
BruceK
Well-Known Member
My head is starting to hurt. I'm beginning to think a boat share be restricted to a husband and wife thing. He buys it, she owns it so he better play ball. The natural order of things and all. Too complicated otherwise.
jfm
Well-Known Member
Petem the flow chart is not unhelpful as a concept but doesn’t go anywhere near covering everything that needs to be covered. A few points.
1. The green wording -NO!- don’t confuse ending someone’s share with ending the agreement, as RYA did. Basic schoolboy error. Some rights and obligations in the agreement might need to survive the sale of the boat share.
2. Think carefully because in all divorce clauses (eg company joint ventures, from which I’ve made a fortune with clients spending inordinate time stupidly negotiating) you are pulling the trigger without knowing which way the gun is pointing. This thread has a bias towards getting a nice outcome for Petem when the other guy wants out. But what if you want out Petem? So before you write a clause that prevents the getter outer selling his share to a horrible person, decide whether that clause is likely to help or hurt you. What if you want out and the other two refuse to bless the person you’re selling to, even though he/she isn’t a bad bloke? You’re knackered and don’t get your money.
3. You need to think about enforcement. Say you want out and it goes to the part of the process where the whole boat is sold. What if another partner doesn’t want out and subverts the sale?. What if he just goes sick the day he is meant to hand in his BoS to the new 100% owner? You can’t sue him for damages and you will lose your buyer long before you get a court judgement for specific performance, so what are you going to do? You need a PoA clause. When you write a rule you need to think about what leverage you have to force compliance.
4. You need to agree on obligations after the sale.
5. I think a backstop date as mentioned above is a smart idea. 4 years maybe, then sell whole boat. You can always override it unanimously.
So it’s much more involved than your chart.
As you know I did a share way back in 1999 and 2004. I chose partners who would be so nice that we would never need to read the agreement and that turned out true except that both wanted out(at different times) before me. So I think the exit/divorce clauses matter. As it happens I knew at the start which way the gun was pointing (namely, I would be the remainer) so made sure the clauses worked ok in that scenario. It’s handy if you can predict the future
1. The green wording -NO!- don’t confuse ending someone’s share with ending the agreement, as RYA did. Basic schoolboy error. Some rights and obligations in the agreement might need to survive the sale of the boat share.
2. Think carefully because in all divorce clauses (eg company joint ventures, from which I’ve made a fortune with clients spending inordinate time stupidly negotiating) you are pulling the trigger without knowing which way the gun is pointing. This thread has a bias towards getting a nice outcome for Petem when the other guy wants out. But what if you want out Petem? So before you write a clause that prevents the getter outer selling his share to a horrible person, decide whether that clause is likely to help or hurt you. What if you want out and the other two refuse to bless the person you’re selling to, even though he/she isn’t a bad bloke? You’re knackered and don’t get your money.
3. You need to think about enforcement. Say you want out and it goes to the part of the process where the whole boat is sold. What if another partner doesn’t want out and subverts the sale?. What if he just goes sick the day he is meant to hand in his BoS to the new 100% owner? You can’t sue him for damages and you will lose your buyer long before you get a court judgement for specific performance, so what are you going to do? You need a PoA clause. When you write a rule you need to think about what leverage you have to force compliance.
4. You need to agree on obligations after the sale.
5. I think a backstop date as mentioned above is a smart idea. 4 years maybe, then sell whole boat. You can always override it unanimously.
So it’s much more involved than your chart.
As you know I did a share way back in 1999 and 2004. I chose partners who would be so nice that we would never need to read the agreement and that turned out true except that both wanted out(at different times) before me. So I think the exit/divorce clauses matter. As it happens I knew at the start which way the gun was pointing (namely, I would be the remainer) so made sure the clauses worked ok in that scenario. It’s handy if you can predict the future
Assassin
Well-Known Member
List of definitions?
lw395
Well-Known Member
Would there be a parallel path in the flow chart, where the boat is offered at brokerage either to sell the whole boat or the share depending who comes along?
The shares I have been involved with, the existing members might well want a right of veto over new share owners.
Some people form syndicates to run for a limited period, then the boat will be sold or a new syndicate formed. Happens with racing boats, people agree to campaign a boat for a couple of seasons. Sometimes the running costs are met by the syndicate while the capital remains with one owner.
Sorry, I'm off at a bit of a tangent, but thanks for the info in this thread.
The shares I have been involved with, the existing members might well want a right of veto over new share owners.
Some people form syndicates to run for a limited period, then the boat will be sold or a new syndicate formed. Happens with racing boats, people agree to campaign a boat for a couple of seasons. Sometimes the running costs are met by the syndicate while the capital remains with one owner.
Sorry, I'm off at a bit of a tangent, but thanks for the info in this thread.
petem
Well-Known Member
Thanks everyone for their additional comments. I'll reply to JFM's detailed comments later via an v0.2 version of my flow chart .
Anyhow, regarding right of veto over new syndicate members, as JFM very eloquently puts it, you need to make sure which way the gun is pointing before inserting this into the syndicate agreement. As some may be aware, due to personal reasons, one of my partners has unfortunately decided to sell his share. I could leave it entirely to him to find a buyer (other syndicates, such as the Sq52 in Alcudia, have members selling their shares on eBay). However, as I have a vested interest in finding a suitable person to join our syndicate I have taken an active role in finding a buyer for his share.
Also, as JFM alludes to above, if you need to resort to the terms of a syndicate agreement, the syndicate is probably doomed.
Foy anyone considering joining or setting up a syndicate, it's really important that you like your fellow sharers and also that everyone is pretty laid back. If you're running the boat, you will have a lot of contact with them!
Regarding a minimum term for a new partner, this is something that we have already discussed and happily agreed to.
.Anyhow, regarding right of veto over new syndicate members, as JFM very eloquently puts it, you need to make sure which way the gun is pointing before inserting this into the syndicate agreement. As some may be aware, due to personal reasons, one of my partners has unfortunately decided to sell his share. I could leave it entirely to him to find a buyer (other syndicates, such as the Sq52 in Alcudia, have members selling their shares on eBay). However, as I have a vested interest in finding a suitable person to join our syndicate I have taken an active role in finding a buyer for his share.
Also, as JFM alludes to above, if you need to resort to the terms of a syndicate agreement, the syndicate is probably doomed.
Foy anyone considering joining or setting up a syndicate, it's really important that you like your fellow sharers and also that everyone is pretty laid back. If you're running the boat, you will have a lot of contact with them!
Regarding a minimum term for a new partner, this is something that we have already discussed and happily agreed to.
jfm
Well-Known Member
Hit nail on head Pete. When I was in a syndicate I was v lucky that the other two guys were super nice/gentleman/laid back. It's the most important thing.
jfm
Well-Known Member
Yes but that doesnt mean good syndicate agreements aren't v useful. If you have a good agreement, then the fact it is there, and is clear and forceful, is part of the reason it never gets referred to. Nuclear deterrent.
petem
Well-Known Member
Thanks and thanks for your PM too. I'm not convinced a list of definitions will add any value. I think the "determining partner" definition is obvious.
petem
Well-Known Member
OK JFM / Benjenbav, here's my attempt at re-drafting clause 6. I don't know how to draft the PoA bit nor the ongoing obligations so you might need to help me with those bits.
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6. Termination of agreement
6.1 If either of the Parties has reasonable cause or desire to sell his share of the Boat, he may, by individual notice in writing to the other Parties, indicate his desire to sell.
6.2 Upon such notice in writing being delivered, the remaining Parties shall be given the opportunity to purchase the share of the determining Party at such price as the Parties may agree. If the remaining Parties do not wish to purchase the determining Party’s share then the determining Party shall obtain agreement by another to take on the share of the determining Party.
6.3 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 the sale of his share.
6.4 If, within six months, the determining Party is unable to obtain agreement by another to take on his share then trade price valuations shall be obtained from one or more recognised Boat brokers and the entirety of the Boat shall be sold at the best price obtained above. Each of the Parties shall be at liberty to purchase the Boat outright for the trade price obtained above. Each of the Parties on receiving his share of the sale money shall execute the necessary Bill of Sale of his share in the Boat to the purchaser and deliver up possession of the Boat [PoA clause?]. The proceeds and costs of such sale shall be calculated according to their respective shares.
6.5 This agreement will end following the completion of the sale of a share or the sale of the Boat in its entirety [Ongoing obligations?].
6.6 In the event of the death of one of the Parties the Deceased’s share of the Boat shall pass in accordance with the Deceased’s Will or the Intestate Rules. If the Beneficiary of the Deceased Party’s share elects to sell his share in the Boat he shall do so in accordance with Clause 6 of this Agreement.
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Be gentle with me!
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6. Termination of agreement
6.1 If either of the Parties has reasonable cause or desire to sell his share of the Boat, he may, by individual notice in writing to the other Parties, indicate his desire to sell.
6.2 Upon such notice in writing being delivered, the remaining Parties shall be given the opportunity to purchase the share of the determining Party at such price as the Parties may agree. If the remaining Parties do not wish to purchase the determining Party’s share then the determining Party shall obtain agreement by another to take on the share of the determining Party.
6.3 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 the sale of his share.
6.4 If, within six months, the determining Party is unable to obtain agreement by another to take on his share then trade price valuations shall be obtained from one or more recognised Boat brokers and the entirety of the Boat shall be sold at the best price obtained above. Each of the Parties shall be at liberty to purchase the Boat outright for the trade price obtained above. Each of the Parties on receiving his share of the sale money shall execute the necessary Bill of Sale of his share in the Boat to the purchaser and deliver up possession of the Boat [PoA clause?]. The proceeds and costs of such sale shall be calculated according to their respective shares.
6.5 This agreement will end following the completion of the sale of a share or the sale of the Boat in its entirety [Ongoing obligations?].
6.6 In the event of the death of one of the Parties the Deceased’s share of the Boat shall pass in accordance with the Deceased’s Will or the Intestate Rules. If the Beneficiary of the Deceased Party’s share elects to sell his share in the Boat he shall do so in accordance with Clause 6 of this Agreement.
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Be gentle with me!
jfm
Well-Known Member
Pete, it’s awful. Every sentence. Too much to deal with by listing corrections in a forum post. Fundamentally the language is writing a commentary about what you’d like to happen (eg first sentence of 6.6) whereas you should be specifying peoples rights and obligations and what trigger events bring those things into play. As bjb already said, if you want to get there don’t start here.
petem
Well-Known Member
#disheartened!
OK, if I take 6.2 ...
Upon such notice in writing being delivered, the remaining Parties shall be given the opportunity to purchase the share of the determining Party at such price as the Parties may agree. If the remaining Parties do not wish to purchase the determining Party’s share then the determining Party shall obtain agreement by another to take on the share of the determining Party.
Rights:
Remaining parties have the right to purchase the sellers share
Selling party has right to sell his share on the open market
Obligations:
Selling party is obliged to offer his share to the remaining parties
Triggers:
Party wishes to sell his share
Is my understanding correct?
OK, if I take 6.2 ...
Upon such notice in writing being delivered, the remaining Parties shall be given the opportunity to purchase the share of the determining Party at such price as the Parties may agree. If the remaining Parties do not wish to purchase the determining Party’s share then the determining Party shall obtain agreement by another to take on the share of the determining Party.
Rights:
Remaining parties have the right to purchase the sellers share
Selling party has right to sell his share on the open market
Obligations:
Selling party is obliged to offer his share to the remaining parties
Triggers:
Party wishes to sell his share
Is my understanding correct?
jfm
Well-Known Member
Pete we are polishing a turd here. Almost every sentence of the RYA doc is awful.
You have to start at 6.1.
Why is the “if” condition included? Do you think the (important) word “reasonable” qualifies just “cause”, or “desire” as well? What precise function does the word “individual” do?
In 6.2
The “determining Party” expression is horrible and clumsy.
The second sentence imposes an obligation. By when, on what terms, and what if he doesn’t?
There is danger of dispute as to whether the important “do not wish” trigger is pulled so that should be by notice in writing. And anyway this should not be drafted as a matter of mere wishing but one of actually getting chequebook out and buying.
I hate the “take on” expression but in any case it needs to involve D buying the share and executing a deed of adherence (in agreed form) to the syndicate agreement.
And so on. I have to stop there because as noted above this is a turd/Mr Sheen situation. Bjb was right. You might think I’m being pedantic but these are divorce not marriage clauses.
You have to start at 6.1.
Why is the “if” condition included? Do you think the (important) word “reasonable” qualifies just “cause”, or “desire” as well? What precise function does the word “individual” do?
In 6.2
The “determining Party” expression is horrible and clumsy.
The second sentence imposes an obligation. By when, on what terms, and what if he doesn’t?
There is danger of dispute as to whether the important “do not wish” trigger is pulled so that should be by notice in writing. And anyway this should not be drafted as a matter of mere wishing but one of actually getting chequebook out and buying.
I hate the “take on” expression but in any case it needs to involve D buying the share and executing a deed of adherence (in agreed form) to the syndicate agreement.
And so on. I have to stop there because as noted above this is a turd/Mr Sheen situation. Bjb was right. You might think I’m being pedantic but these are divorce not marriage clauses.