Update 02: EGM to be convened – Potential club closure… really?

On 7 March 2022 the Directors notified members of the convening of an Extraordinary General Meeting, to be held on 22 March, following receipt of unexpected, “shocking news” – a projected increase in electricity costs for the coming financial year of £36,200.

The notification is, initially, quite clear in stating what the members are being asked to vote upon:

The members of the club agree to and authorise the Company to charge an Energy Levy, in addition to the membership fee, for the 2022/23 membership year. Accordingly, the committee is further authorised to execute the best electricity renewal contract on offer in order to avoid the default charge”.

However, further into the lengthy notification the text, in our view, misleadingly suggests that there are a number of other options upon which to vote and, further, misleads members into believing that if they don’t agree to a significant increase in their membership fee the club will have to close.

The directors are responsible for ensuring every effort is made to trade solvently. Our duty is to ensure we exercise reasonable skill, care and diligence in managing the club and its finances. We can’t therefore guess or hope for solutions where money is not a reasonable expectation.

Hence, we call this EGM meeting to vote on where we want the club to go. These are the options we see facing us, and consequently the voting form will decide our fate:

1. The club closes on 31st March 2022 and is wound up…
2. The members agree to an “Energy Levy” for one year to cover the estimated shortfall…
3. The club is closed, we dissolve the company, and we try to find ways to restructure the squash club in a different way, for example, where members share the running of the club.“

The reality is that, save for #2, these are not options in the proposed resolution to be voted upon, but are selective, extreme outcomes, set out in a manner which misleadingly suggests to members that an urgent decision must be made – absolutely not the case as explained below.

Firstly, the Directors have no statutory obligation to seek membership approval to renew the electricity contract. If it’s the cheapest option available, which they state it is, then there is no question that they should simply renew at the earliest opportunity as prices might increase.

Secondly there are, of course, alternative/ hybrid options for the club to service the increased costs which the Directors appear to have suggested could only happen in conjunction with closing the club. For example, a combination of significantly reducing the biggest overhead – staff costs, running at around £44,000+ per annum – in conjunction with, as suggested by the Directors, utilising volunteer members to cover basic duties. Further, a less extreme increase in monthly membership fees could be introduced thereby reducing the likelihood of members leaving. Clearly these could all be implemented without closing the club.

Of course, reducing permanent staff costs should have happened some time ago as for many years, even prior to Covid, membership numbers have been insufficiently high to justify or sustain paying the salaries of two full time managers.

Thirdly, the club is asset rich.

Fourthly, and most pertinently, the notification confirms the availability of sufficient funds to service the projected electricity cost increase for 8 months without any such intervention at all.

Given the above we can’t help but question this unseemly rush to hold an EGM and the suggestion that the club is in imminent danger of having to close when it is so clearly not the case?

Click here to read/download the full Explanatory EGM Notice