OMOV A serious discussion

[IanCalvert]

Rdc:

The Andrew Farthing amendment to set up the structure of Bronze, Silver etc. defines members who aren't members of the company.

Precisely.

But it is members of the company who have the right to vote - on the basic legal principle that those who offer the guarantee (or own the shares) must have a say in actions which impact upon their own potential liability - however, small.

There are many ordinary ECF members who have actually offered the guarantee but have not been given a vote. And many who have not who have.

IF this in fact is the undisputed legal position, why has nothing been done about it in recent years?

[Michael Farthing]

Thank you Martin. I had begun to suspect that but an earlier comment had left me thinking that it was external to the ECF (or at least, external in the minds of some contributors). Presumabaly the whole issue could easily be sorted by describing £1 of the direct membership fee as an up front payment of the guarantee as is the case, by analogy, with a paid up share.

[Martin Regan]

In the absence of any challenge, it must surely be presumed that it was legal to set up the ECF in that manner.

Roger.

My impression was that it was the best that could be done at the time as the then board rightly wanted limited liability, but everyone was aware of the contradictions.

If you have signed the form and if you remain a member - I would be interested to know how you can be barred from voting.

The articles can amend the votes given to members and they can even create a non-voting class of member, but as far as I am aware they can not take away the vote of a company member.

But I think the point I was making is that some of those voting might not have been strictly entitled to.

[Martin Regan]

Presumabaly the whole issue could easily be sorted by describing £1 of the direct membership fee as an up front payment of the guarantee as is the case, by analogy, with a paid up share.

yes you could, but a share, of course, generally carries a vote.

[Mick Norris]

A question for the new ECF legal advisor?

[Roger de Coverly]

What is this 'White Form' you refer to (not what its effect is - I know that) but where it has been defined and by whom?

This is what it looked like by 2011.

http://web.archive.org/web/201510181347 ... -20111.pdf

The key section being

I
wish to become a member of English Chess Federation subject to the provisions of the Memorandum and Articles of Association of the Company and to the Bye Laws and Regulations. I agree to pay to the Company an amount of up to £1 if the Company is wound up while I am a member or for up to 12 months after I have left the Company.

To the best of anyone's knowledge, it was a home made invention, which materialised shortly after the formation of the ECF and its absorbing of the BCF.

I've being going through old BCF websites looking for the first mention of white forms.

There's this, which turned out to be a blatant lie as to how the FIDE requirements were actually interpreted
http://web.archive.org/web/200608261911 ... rating.htm

I think I've now found it. It's a .doc file, so I cannot really give a link. Here's the explanatory note part of it in all its 2005 glory.The second part is much as above.

APPLICATION FOR MEMBERSHIP BY DIRECT MEMBERS

To: All Direct Members of the British Chess Federation

Colleagues,

ENGLISH CHESS FEDERATION, which became active on 22nd October, is a company limited by guarantee. This means that it does not have shares or shareholders, but instead it has members. Its day-to-day management is carried out by the directors, but by becoming a member you will be entitled to do the following things:

_ to participate in the election of Direct Member Representatives to represent you by attending and voting at general meetings of the Company.
_ to receive benefits in accordance with the category of Direct Member in which you are enrolled, as set out in the Direct Member Bye Laws.

You will not be entitled to receive any dividend or other income from the company.

If the Company makes a profit this will be retained to help pay for the Company’s activities in the following years. If the Company is wound up you will not receive any money from the Company because its constitution requires that it should be transferred to another similar organisation in accordance with clause 7 of its Memorandum of Association.

The constitution is made up of the Memorandum and Articles of Association, the Bye Laws and Regulations. The Memorandum sets out what the Company can do and why it exists; and the Articles deal with the holding of meetings, the admission of members, the election of directors and other rules; the Bye Laws and Regulations, also relate to the running of the Company. The Memorandum and Articles of Association are legal documents that are registered on the public records for the Company held at Companies House. They may also be inspected at The Watch Oak, Chain Lane, Battle, East Sussex TN33 0YD and on the ECF website http://www.bcf.org.uk, where you may also inspect the Bye Laws and Regulations made by the Company to date.

You will not be liable for any debts of the Company by becoming a member. You will not be liable if someone brings a legal case against the Company. This is because like most other companies it is a limited company, which means your liability as a member is limited. If the company is wound up (which may happen, for example, if it cannot pay its debts) then you would have to pay no more than £1 to the Company. This is the amount that you ‘guarantee’ or promise to pay to the Company by becoming a member, as set out in clause 6 of the Memorandum. In addition, if you have paid a subscription to the Company there may not be enough funds left to return to you any of that subscription, even if the winding up happens part way through a membership year.

If you would like to become a member, the procedure for Direct Members of British Chess Federation is governed by Article 6 (1). A written undertaking, in the form of the attached Application, must be completed with an original signature (fax is not sufficient) and sent to the ECF Office at The Watch Oak, Chain lane, Battle, East Sussex TN33 0YD. You will then become a Direct Member of English Chess Federation in the division of members set out in Article 5 (13), equivalent to your membership of the British Chess Federation. This will be on the basis that any membership fee paid to the British Chess Federation (whether before or after the date the Application is received) shall be deemed to have been paid to English Chess Federation.

Yours faithfully,
Gerry Walsh, ECF President

[Martin Regan]

IC wrote:

IF this in fact is the undisputed legal position, why has nothing been done about it in recent years?

Because it is much more nuanced than that and is not undisputed. The move to a company from the unincorporated BCF meant that most of our systems could not really be catered for. So everyone bumbled through with the least worst option.

Roger: That's a very good find.

Edited to keep the thread on subject.

[Roger de Coverly]

but by becoming a member you will be entitled to do the following things:

_ to participate in the election of Direct Member Representatives to represent you by attending and voting at general meetings of the Company.

That old Gerry Walsh letter (or was it Anderton?) opens up an interesting possibility. What it didn't say was that the Direct Member Representatives had so little power that Direct members were effectively just as disenfranchised as they had been under the BCF. But there's a stroke of the pen OMOV solution or part OMOV solution. Just create enough Direct Member Representatives and give them enough votes that they can form a majority if all are in agreement.

[Michael Farthing]

Presumabaly the whole issue could easily be sorted by describing £1 of the direct membership fee as an up front payment of the guarantee as is the case, by analogy, with a paid up share.

yes you could, but a share, of course, generally carries a vote.

well exactly: it means that 'direct members' could without impediment be 'members of the company' and so could have votes (though not all the votes) and therefore provides an existing mechanism for the introduction of increased democratic participation by direct members (loosely and imprecisely being referred to as OMOV). If all direct members had one vote it might, ironically, be a necessary compromise to greatly increase the votes allocated to organisations - but in principle a formula could be devised to realign the power structures without rebuilding the organisation from scratch and without putting undue stress on it during a transition.

The mechanics of 10000 turning up (at their own expense) to the agm is not one I feel we need concern ourselves with. It would, however, be possible for individuals to nominate proxies, as at present organisations do, and I see no problem with that if we have the likes of Ben, or alternatively a Company Secretary who might be required to handle only directed proxies.

Whether this would make a practical difference to what the ECF actually does is a much more debatable question, but it might help to relieve some of the sense of exclusion felt by quite a number of contributors to this forum.

[Mick Norris]

Simply if you get all ECF members to sign a form that gives them a legal right to vote then bingo you have 1000s of votes thus dwarfing the 300 odd in Council

But it cant be as simple as that?

Given online membership has no paper to be signed, what difference would that make?

[Roger de Coverly]

But it cant be as simple as that?

Gerry and David spotted that one. I've retrieved the original form as sent to BCF Direct members. It states that the voting rights are confined to being able to elect member representatives to attend and vote at meetings. Sounds good, until you realise that there are only ten of them and they have one vote each in comparison to the hundreds available to organisations.

Given online membership has no paper to be signed, what difference would that make?

In a tortuous piece of wording, there's a category of members who aren't members.

What we are trying to pin down is the extent to which if at all, having a vote or indirect vote is allowed only if you are a guarantor member. This is at two levels, whether this is what the ECF Articles say or infer, and whether this is an overriding Companies Act requirement.

[Martin Regan]

What we are trying to pin down is the extent to which if at all, having a vote or indirect vote is allowed only if you are a guarantor member. This is at two levels, whether this is what the ECF Articles say or infer, and whether this is an overriding Companies Act requirement.

My advice from David Anderton when I exempted the NMS members from the requirement to fill in the form - he was completely against - was that legally only guarantor members could vote at an AGM - it was unclear whether those giving equal guarantees could be given unequal votes, but no one asked too many questions about that.

So quite apart from the OMOV implications, I would ask how many votes cast at this AGM, if any, were cast by those who were not members of the company and were not acting as a proxy for members of the company?

[John Moore]

Oh err - that might be serious. Or it might not depending if anyone is bothered

[Mike Truran]

With 4NCL Ltd, members have voting rights at General Meetings and directors (who comprise the Council) have voting rights at Council Meetings. All members sign a letter to confirm their acceptance of membership (but as we don't have many members it's a manageable administrative burden). I believe (but may be wrong) that signing a membership acceptance letter is a legal requirement. Members have the same £1 obligation as ECF Limited members should 4NCL Limited be wound up - that obligation is contained within the membership acceptance letter.

Yesterday's ECF meeting was an Annual General Meeting at which ECF Limited members have voting rights. The Companies Act 2006 part 13 section 284 probably contains at least part the stuff you're looking for, but I lack the energy to plough through the other 80 or so sections of Part 13. it would probably be better for a lawyer to confirm one way or the other.

But I suspect David Anderton was probably right.

[Roger de Coverly]

I would ask how many votes cast at this AGM, if any, were cast by those who were not members of the company and were not acting as a proxy for members of the company?

We've just had a Governance Review and it doesn't appear this important if pedantic procedural point has been addressed. Given that it has to be an issue faced by all CLGs, what has been their solution?