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Questioning the Need for Required Contributions
During the past 12 months, we have had a partner who has lost
her employment twice, has been hospitalized and has had some unexpected
expenses for her car and home. It really has been a mounting financial
struggle for this individual, who joined our investment club over 12
years ago. Overall, this partner has an excellent record of attendance
and has actively served as an officer since our club was officially
organized in 1997. Up until April 2009, she has been able to meet her
$25 monthly payments.
Our club bylaws allow up to a 61-day period for partners to meet their
financial responsibility, and if a partner is not able to do this, he
or she then becomes involuntary (in status) and is then completely
withdrawn from our investment club.
Today I received and
accepted a $53 payment (includes the $3 late fee) on behalf of the
partner; this donation was provided by another partner who wishes to
remain anonymous. However, the donor asked if we need to or should
amend our bylaws.
1 How are other treasurers coping with “hardship cases” during these difficult economic times?
2 What guidelines do you have written in your club’s bylaws, and do you have any time limits?
Asked via BetterInvesting’s Discussion List for Club Treasurers
With unemployment hovering at 10 percent and bankruptcy and home
foreclosures at historic highs, many clubs are facing these same
issues. Legally, you must follow your partnership agreement. So, unless
your partner’s situation changes, she quits or the partnership
agreement is changed, this problem will persist.
clubs add a minimum contribution amount and consequences if the minimum
isn’t met. The intent behind this clause usually is to have enough
money to purchase stocks regularly; members can lose interest when
clubs aren’t investing regularly.
There are, however,
better ways to deal with this problem. Alternative solutions include
other members contributing more, recruiting new members and selling
underperforming stocks in the club’s portfolio.
I do think
you should consider simplifying your partnership agreement’s Capital
Contributions section to the one used by the Mutual Investment Club of
Detroit, which has been operating for about 60 years. Its agreement
reads, “The partners may make capital contributions to the partnership
on the date of each periodic meeting in such amounts as the partnership
shall determine, provided, however, that no partner’s capital account
shall exceed twenty percent (20%) of the capital accounts of all
You’ll notice the section says, “The partners may
make capital contributions.” Partners aren’t required to make specified
payments at each meeting. Also note that there’s no directive for late
payment fees if a partner fails to make a monthly contribution.
also want to consider what’s more important to your club: keeping an
actively participating member willing to serve as an officer or
assessing the $3 late fee and ensuring the ability to purchase another
share of stock. Financial institutions give you a grace period and then
start charging late fees. You need to decide whether that’s how you
want to treat your members.
Modifying your partnership
agreement should also make your officers happy because it will simplify
their jobs. No longer will they have to worry about checking whether
any members are late with payments, any members are more than 60 days
behind and any late fees were charged and paid. In my experience
officers — treasurers in particular — are difficult to keep. By
changing your partnership agreement, you may also gain the benefit of
improving the retention rate of your officers.
is often the best approach. Members who are underperforming will
usually leave of their own accord. As the partner is an active
participant in the club, the amount of money she contributes should not
be a concern.
Colleen Mulder-Seward is a BetterInvesting member and freelance writer.