Good points!
9873210 wrote:First: I have been involved in a number of small clubs. Often we were required to have certain clauses in our by-laws by third parties such as a University, Insurance company, National affiliated club or the tax code. Whether or not that matters in this case does not appear to have been answered. I imagine that tax laws, or money laundering laws could apply here.
We all worked in the same industry, but there's never been any limitation on who could join.
We don't see this as any different to gifting shares to a spouse in order to make best use of tax allowances. eg, if I have £100k of shares that are in profit to £20k, I can gift £50k to my wife and we then each have £10k of profit. If we then sell them the capital gains are covered by the individual allowance (assuming no other disposals in the year). Since investment clubs aren't taxable entities and each member has a personal tax liabilty proportionate to their percentage holding, the tax position isn't different to holding an equal amount of shares outside of the club.
Second: does the existing constitution allow additional members? This might need to be added.
It allows them and we've already started the formal process of admitting them.
Third: Is it existing practice that all members have equal shares? Is this in the constitution? This makes accounting easier, if it is going to change you will need to adjust your accounting. Not too difficult, unless you forget to do it.
We started out that way but have had unequal shares since 1999. We use a weighed average of monthly holdings to calculate the annual tax liabilty so it would have been better if we had done this earlier in the tax year. As it is, if we complete the gifting of half our holdings before our September valuation we'll only be transferring 29.2% of the tax liability to our spouses this year but from then on it will be 50%.