What should be the valuation date for a full withdrawal?
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What should be the valuation date for a full withdrawal? Our partnership contains the following statement relative to the valuation of a full withdrawal - "In making payments, the value of the partnership as set forth in the valuation statement prepared at the first meeting following the meeting at which written notice is received from a partner requesting a partial or full withdrawal, will be used to determine the value of the partner's capital account." We inherited this statement from an investment club template when we first formed the club. Now some of our members are questioning why we need to wait for the next month's valuation to determine the value of the withdrawal. Can't we just use the current valuation in effect at the meeting at which the resignation is submitted? This change sounds fine to me but I know withdrawals are complicated transactions. So we're interested in understanding what valuation date other clubs use for withdrawals and the rationale behind the selection of a date. Thanks in advance for your help! Len Delmolino Treasurer, Oak Point Investment Club Midleboro, MA Dear Len, The rationale behind letting some time pass was to discourage frequent withdrawals by members trying to time the market. Just like a mutual fund, it's difficult to operate an investment club if money is being withdrawn from the club too frequently.Laurie Frederiksen
Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe On Mon, Sep 16, 2013 at 3:56 PM, Leonard J Delmolino <ldelmolino@comcast.net> wrote: Our partnership contains the following statement relative to It's important to have the valuation date used to establish the value of a withdrawal close to the date on which you will actually pay the withdrawing partner (be that with cash or with transferred stock). For example, if your club establishes the value of a withdrawal in May but doesn't actually pay the withdrawal until June, what happens of the stock market "tanks" between those two dates? ----- Original Message ----- From: "Leonard J Delmolino" <ldelmolino@comcast.net> To: <club_cafe@bivio.com> Sent: Monday, September 16, 2013 12:56 PM Subject: [club_cafe] What should be the valuation date for a full withdrawal? > Our partnership contains the following statement relative to > the valuation of a full withdrawal - > > "In making payments, the value of the partnership as set > forth in the valuation statement prepared at the first > meeting following the meeting at which written notice is > received from a partner requesting a partial or full > withdrawal, will be used to determine the value of the > partner's capital account." > > We inherited this statement from an investment club template > when we first formed the club. > > Now some of our members are questioning why we need to wait > for the next month's valuation to determine the value of the > withdrawal. Can't we just use the current valuation in > effect at the meeting at which the resignation is submitted? > > This change sounds fine to me but I know withdrawals are > complicated transactions. So we're interested in > understanding what valuation date other clubs use for > withdrawals and the rationale behind the selection of a > date. > > Thanks in advance for your help! > > Len Delmolino > Treasurer, Oak Point Investment Club > Midleboro, MA We use the month after a member's last payment because they are actually paid up until that date. A member resigned last night. She did not make a payment at last night's meeting, so she was paid up until last night. Her valuation date will be yesterday. We have never done partial or stock payments. She is moving so she will get her money less 5% probably within 2 weeks or less, even though our agreement says within 90 days. She is one of our founding members so we sold $20,000 in stock to pay her off. This is the way our agreement reads so if we are doing it wrong, I need some help correcting it. We have done it this way since 1995. Suppose I use the month after approach mentioned earlier and the market tanks this week. In our opinion that would not be fair to her to value her next month.
On Tue, Sep 17, 2013 at 12:27 AM, Jim Thomas <jimt075@comcast.net> wrote: It's important to have the valuation date used to establish the value of a withdrawal close to the date on which you will actually pay the withdrawing partner (be that with cash or with transferred stock). The point Kittie makes about the market tanking while the departing member waits was the concern that our membership voiced in our recent discussion about a resigning member. The resignation was accepted and we had adequate cash to pay off the departing member - so they asked why wait a month? We're interested in knowing how other clubs handle this situation (thanks Kittie) so that we can update our Partnership Agreement with full knowledge of the potential consequences. Thanks to everyone for their responses so far. Len Delmolino Treasurer, Oak Point Investment Club Middleboro, MA Our club sets the valuation day at the meeting following the meeting when the resignation/withdrawal was accepted. That prevents the member from timing the market and gives the club time to decide how the request will be funded. We have a clause that the member may be paid anytime within 90 days after the valuation date.
Don't worry about the market "tanking". It affects all the members in or out of the club. Win some and lose some!!
Jayne Gilbert
RICH (Rainbow Investment Club of Houston)
From: Leonard J Delmolino <ldelmolino@comcast.net>
To: club_cafe@bivio.com Sent: Tuesday, September 17, 2013 3:38 PM Subject: [club_cafe] Re: What should be the valuation date for a full withdrawal? The point Kittie makes about the market tanking while the departing member waits was the concern that our membership voiced in our recent discussion about a resigning member. The resignation was accepted and we had adequate cash to pay off the departing member - so they asked why wait a month? We're interested in knowing how other clubs handle this situation (thanks Kittie) so that we can update our Partnership Agreement with full knowledge of the potential consequences. Thanks to everyone for their responses so far. Len Delmolino Treasurer, Oak Point Investment Club Middleboro, MA Our St. Joseph Valley Investors Club PA says: >> [Notice of withdrawal] shall be effective with the valuation statement prepared at the end of
the month following the month in which [it] is
received. . . . In the case of a withdrawal [which is] paid entirely in cash when no securities will be sold to obtain cash for
the withdrawal, the notice of withdrawal shall be effective with the Valuation
Statement prepared at the end of the month in which such notice of withdrawal
is received. . . . The amount being withdrawn shall be paid
within ten days after the valuation date . . . << The first condition, which assumes payment by transfer of securities, is to avoid attempts at market timing. We always transfer appreciated securities for all but a fractional share in the payment, except possibly in a very special case. The ten day rule makes allowance for delays by the broker in carrying out our orders. We assess no charges or penalties for
withdrawal, except to cover a commission on a sale, and that has never happened. Our meetings are on the first Thursday, and our valuation date is always the last day of the month. Yahoo! mail chooses my fonts and I can't do anything about it. Ed Berners
For those of you who are worried about the market "tanking" and the impact on a withdrawal, there are two things you should think about: 1. If you let a member withdraw immediately at any time, will you have issues with people pulling too much money out of the club too quickly? This could severely disrupt your club operations if it happened. Giving a 30 day delay in valuation smooths out the process a bit.Laurie Frederiksen
Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe On Tue, Sep 17, 2013 at 8:47 PM, Edgar Berners <eberners76@sbcglobal.net> wrote:
To clarify things a bit, our club has had 5 members resign in our 3+ years of existence (we've also had new members join so our membership roster is good). All of the resignations have been as a result of personal circumstances of the members (moving, no time to participate, etc.). These 5 resignations have also been the only withdrawals as well. No market timing involved. In the latest resignation which occurred at the beginning of September, there was much speculation that the market is due for a correction and that our withdrawing member would lose value if we waited a month to value his withdrawal (and, of course, exactly the opposite has happened -:)). So several members felt that we should use the current valuation at the time and pay the resigning member immediately. So this was the concern. In regards to Laurie's points, we certainly need to factor in considerations for point number 1 if and when we revise our Partnership Agreement. We totally agree with point number 2 that valuation and withdrawal should be close together. Thanks to everyone for your input. It is very helpful! Len Delmolino Treasurer, Oak Point Investment Club Middleboro, MA From: "Laurie Frederiksen" <laurie@bivio.biz> To: "The Club Cafe" <club_cafe@bivio.com> Sent: Wednesday, September 18, 2013 11:13:49 AM Subject: Re: [club_cafe] Re: What should be the valuation date for a full withdrawal? For those of you who are worried about the market "tanking" and the impact on a withdrawal, there are two things you should think about: 1. If you let a member withdraw immediately at any time, will you have issues with people pulling too much money out of the club too quickly? This could severely disrupt your club operations if it happened. Giving a 30 day delay in valuation smooths out the process a bit.Laurie Frederiksen
Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio Follow Us on Google+ Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe On Tue, Sep 17, 2013 at 8:47 PM, Edgar Berners <eberners76@sbcglobal.net> wrote:
Our club computes the withdrawal the following month after written notice of resignation from the club; but we do have a clause written in our partnership agreement that if withdrawal is within the first six months of membership there will be NO PAYMENT of contributions. This keeps members from joining and resigning in a very short period of time. |
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