Corporate · · 9 min read
Members' club or proprietary club? Choosing a structure, and where liability lands
Most club founders choose a structure once, early, on the advice of whoever was in the room. It then quietly determines who signs the lease, who answers to the licensing authority, and whose personal assets are exposed when a supplier is not paid.
The three structures you will actually be offered
Clubs in England and Wales are usually built on one of three foundations. Each puts risk in a different place.
The unincorporated members' club is the traditional form: an association of members bound by a set of rules, run by an elected committee. It is cheap, private and requires no filing. It is also not a legal person, which is the source of most of its problems.
The company limited by guarantee keeps the members'-club character while giving the club separate legal personality. Members guarantee a nominal amount, commonly one pound, instead of holding shares. The club can own property, sue and be sued, and the committee becomes a board of directors with the protections and duties that follow.
The proprietary club is an ordinary trading company that sells memberships. The operator owns the assets and takes the profit. Members are customers with contractual rights, not owners.
Why unincorporated clubs catch people out
Because an unincorporated club has no legal personality, it cannot itself hold a lease, open an account in its own right, employ staff or enter a supply contract. Someone has to do those things, and that someone is usually a committee member acting as agent for the members.
The practical consequence is personal exposure. A committee member who signs a five-year lease may be personally liable for the rent. Property is typically held by trustees on behalf of the members, which works until trustees move away, fall out or die without proper appointment of successors. Employment claims, licensing prosecutions and occupier's liability all have to attach to individuals.
Well-drafted rules can allocate indemnities between the club and its officers, but an indemnity from a club with no assets is worth what the club has in the bank.
What incorporation actually buys
A company limited by guarantee separates the club from the people running it. Contracts sit with the company. Directors owe statutory duties under the Companies Act 2006 and are generally shielded from personal liability provided they act properly, do not trade while insolvent and do not give personal guarantees.
The trade-offs are transparency and administration. The company appears on the public register with its directors and accounts. Someone must file confirmation statements and accounts on time. For a club with a lease, employees and real turnover, that is a small price for taking the committee's houses out of the equation.
The licensing consequence of the choice
Structure and licensing are linked, and this is the connection most often missed. A club premises certificate under the Licensing Act 2003 is available only to a qualifying club, which must be established and conducted in good faith as a club, with members controlling the purchase and supply of alcohol.
A proprietary club cannot satisfy that test, because the operator rather than the members controls the supply. It needs a premises licence, with a designated premises supervisor who holds a personal licence. Founders who choose a proprietary structure for investment reasons and then apply for a club premises certificate are usually surprised.
Where investors push, and what it costs
Outside investment tends to pull a club toward the proprietary model, because investors want equity and equity implies ownership by someone other than the members. That is a legitimate commercial choice, but it should be made deliberately, with the licensing and marketing consequences understood. A club that trades on the idea that members own it, while a holding company owns everything, is storing up a difficult conversation.
Hybrid arrangements exist. An operating company can run a club whose members hold genuine governance rights through a separate members' body. These structures work but need careful drafting, particularly around who controls the alcohol supply and who owns the membership list.
A short checklist before you commit
- Will the club hold a lease or employ staff? If yes, incorporation is usually the right answer.
- Do you intend to apply for a club premises certificate rather than a premises licence?
- Who is expected to sign contracts, and have they understood what they are signing?
- If property is held on trust, are the trustees current, and is there a mechanism to replace them?
- Does the membership marketing describe an ownership relationship the structure does not deliver?