Member Withdraw ?
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Member Withdraw ? I have read a lot of the message board looking for my answer and have been unsuccessful, so here goes. A member is withdrawing from our club. Members of the club have raised the following questions.On each question assume they are all cash buy outs. But, let me know if you could also do the same on a stock transfer. Now on our situation there is a little catch. We understand you are only buying units and everyones is equal to what they put in, so if one guy buys more, he buys more units. Here is the catch, our withdrawing member fell 8 months behind in dues. We were waiting and waiting for him to catch up. He has recently asked to withdraw, so we went and looked into Bylaws. Our Bylaws say after 90 plus days late, it is as good as a written letter of your notice to withdraw. Point being, today his value is $1,040, but we are going by our Bylaws, which means back in time to when he was 90 days late. The amount of his holdings after 90 days late is only $743, which is the amount we will pay him less 3 late payments. So, now we have a small profit to divide up between 1,040 - $743= $297. How will Bivio handle this or will it equally be divided up by the remaining members after the member withdraws? (Note : This was a one time mistake on our club, and we realize this will not happen if the member would have been paid right at the 90 days late). See additional questions below. 1. If one member wanted to "buy out" the withdrawing member by themselves (Say they had more money on had than any of the other members)could they do this, if the rest of the club agreed and second could bivio's system handle the transaction. 2. Same situation as above, but now say only 3 out of ten members wish to buy the withdrawing member out. But, the 3 members want to buy him out at different %'s. Member (1) wants 10%, member (2) wants 60% and member (3) wants30%. The 3 members have agreed to each others buy out %'s. Can a club do this and second, can Bivio system handle this transaction. 3. Does all buy outs have to be split equally buy all members, if using cash? Their reason is, say buy out is $25,000 and only one or two guys have that kind of money. The club does not want to sell any stocks, so it says hey if two members want to buy him out thats fine. Can Bivio handle it, with only two members getting all of the stocks of the withdrawing member. If you can provide info on how to enter these if possible please do so. Thank you in advance. Dear Kevin, I am going to leave it to someone else to advise you on what you should use as the valuation date for the withdrawing member. It seems as though if your club didn't enforce your partnership agreement when it should have, that both sides have changed the requirement. But that is a legal question I don't have the background to answer. I can answer some of your other questions. First of all, this member does not "owe" the club for payments he didn't make. He didn't make them, he received no benefit from them and he won't receive them back when he withdraws. Payments to a club affect the capital account of the person making them, they aren't shared by or owed to the other members of the club. It is inappropriate to subtract them from what he is owed to close out his account. In regards to your buyout questions, a buyout is two separate and distinct transactions. You enter a withdrawal for the person leaving and then member payments for the people contributing additional capital. Your members can contribute the same amount he takes out or different amounts. It is up to you. bivio will handle either scenario just fine. -- 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 See comment below.
In a message dated 02/02/11 15:58:20 Eastern Standard Time, kade4111@bivio.com writes:
In this case, I would ignore your bylaws and pay him based on a current withdrawal. He shouldn't be penalized for your club's failure to act in a timely manner. Second, you don't deduct any missed payments. He didn't get additional units at that time, that's his penalty.
You would still handle this as a withdrawal and an independent contribution of funds to purchase units. The transactions aren't linked in any way.
See previous comment.
See previous comment. No one is getting the stocks of the withdrawing member as he doesn't "own" any specific shares of stock.
See previous comment. BTW, it wouldn't matter if the withdrawing member were paid in cash or in stock.
Ira Smilovitz Join me at InvestEd 2011 So, now we have a small profit to divide up > between 1,040 - $743= $297. How will Bivio handle this or > will it equally be divided up by the remaining members after > the member withdraws? I will echo Ira's comment that you should use the current valuation. If your club had paid off the withdrawing member when his holdings were worth $743, the club would not have had his money invested to grow to $1,040. Jack Ranby, Treasurer Grants Partners Investment Club. Thank you for your quick reply. Our Bylaws came from a generic online form ect. In our Bylaws, it states you are required to invest a minimum of $25 a month. Since the withdrawing member did not pay 8 months, we were only ably to go back and charge 3 months based on the Bylaws. We were also able to charge a 3% withdraw fee, but did not based on the Bylaws. I guess this is not the norm, we are new at this and been investing since early 2008. As issues come up we amend the Bylaws. Laurie Frederiksen wrote: > Dear Kevin,I am going to leave it to someone else to advise you on what you should use as the valuation date for the withdrawing member. It seems as though if your club didn't enforce your partnership agreement when it should have, that both sides have changed the requirement. But that is a legal question I don't have the background to answer. > I can answer some of your other questions.First of all, this member does not "owe" the club for payments he didn't make. He didn't make them, he received no benefit from them and he won't receive them back when he withdraws. Payments to a club affect the capital account of the person making them, they aren't shared by or owed to the other members of the club. It is inappropriate to subtract them from what he is owed to close out his account. > In regards to your buyout questions, a buyout is two separate and distinct transactions. You enter a withdrawal for the person leaving and then member payments for the people contributing additional capital. Your members can contribute the same amount he takes out or different amounts. It is up to you. bivio will handle either scenario just fine. > -- Laurie FrederiksenInvest with your friends!www.bivio.comBecome our Facebook friend! www.facebook.com/bivio > Follow us on twitter! www.twitter.com/bivio Kevin, I know this is not what you asked, but my club is also new, we have been investing for only a little over a year, and, as the accountant, I initially had trouble dealing with missed or late member payments. I have finally developed a very useful form of public shaming. At the beginning of every meeting, I go through a sort of 'role call', and I announce who has paid and who hasn't. For those that haven't, I look them in the eye and ask very politely but firmly when I will see their payment in out account. I feel a bit like a kindergarten teacher, but it works like a charm. I hope you don't mind this unsolicited advice, Ellen Ellen Shershow Pena Photography 415.690.0278 On Feb 3, 2011, at 1:07 PM, Kevin Valade wrote:
Kevin: I am confused by your statement that you were only able to charge 3 months instead of 8. There should not be anything to charge. When the member failed to make a monthly payment, he simply failed to receive additional units and the club had less cash to invest. When the member is withdrawn, the club should pay off the value of the units he did purchase. The units he would have purchased had he made his monthly payments do not exist and should not play a role in the withdrawal. I can only understand your comment if the club was issuing the member new units even though he was not making payments. Hopefully, that is not what was happening. Jack Ranby, Treasurer Grants Partners Investment Club Kevin Valade wrote: > Thank you for your quick reply. Our Bylaws came from a > generic online form ect. In our Bylaws, it states you are > required to invest a minimum of $25 a month. Since the > withdrawing member did not pay 8 months, we were only ably > to go back and charge 3 months based on the Bylaws. We were > also able to charge a 3% withdraw fee, but did not based on > the Bylaws. I guess this is not the norm, we are new at this > and been investing since early 2008. As issues come up we > amend the Bylaws. > > > > > > Laurie Frederiksen wrote: > > Dear Kevin,I am going to leave it to someone else to advise you on what you should use as the valuation date for the withdrawing member. It seems as though if your club didn't enforce your partnership agreement when it should have, that both sides have changed the requirement. But that is a legal question I don't have the background to answer. > > I can answer some of your other questions.First of all, this member does not "owe" the club for payments he didn't make. He didn't make them, he received no benefit from them and he won't receive them back when he withdraws. Payments to a club affect the capital account of the person making them, they aren't shared by or owed to the other members of the club. It is inappropriate to subtract them from what he is owed to close out his account. > > In regards to your buyout questions, a buyout is two separate and distinct transactions. You enter a withdrawal for the person leaving and then member payments for the people contributing additional capital. Your members can contribute the same amount he takes out or different amounts. It is up to you. bivio will handle either scenario just fine. > > -- Laurie FrederiksenInvest with your friends!www.bivio.comBecome our Facebook friend! www.facebook.com/bivio > > Follow us on twitter! www.twitter.com/bivio Dear Kevin, Please understand what Jack and I are trying to explain. The payments your club member did not make do not and never would have belonged to the club. Member payments purchase shares of ownership in your club. If he didn't make payments he also didn't get anything. If you wish to penalize him, you can charge a fee on his withdrawal. I think that most would say a fee equal to several months payments is pretty harsh. In effect, if you keep this money you are taking money that belongs to him and redistributing it to all the remaining members. You say your bylaws require monthly payments. What is the penalty that is specified if payments are not made? It's a pretty big penalty for the remaining members to take the amount you're talking about and redistribute it amongst themselves. I imagine that you are all pretty frustrated that this person did not live up to his commitment to the club. However, I hope you will truly understand the consequences of what you have proposed before you implement it as a way to address the problem you had. -- 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 |
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