Clubs often add or cease offering membership categories, change members’ use privileges, implement membership initiatives, offer special membership purchase incentives, or change policies. Club management often wonders, “Do I need to amend the membership documents?”
The failure of a club to amend its membership documents when it should can create problems. A member could challenge a club provision or policy that deviates from the club membership documents. In addition, a potential purchaser, investor or lender for the club may decide not to purchase, invest or lend if it lacks confidence that the membership program is correctly documented.
A club and its counsel should consider several factors in determining whether membership program changes should be reflected in an amendment to membership documents:
- What do the membership document amendment provisions say?
- Do the membership documents include provisions allowing the club to establish categories and implement and change policies?
- Are the changes procedural or substantive?
- Do the changes impact exclusively new members, such that the changes can be reflected in the membership agreements for the new members or do the changes impact existing members, either directly or indirectly?
- Is the change sufficiently material that a new member who learns of the change after he or she becomes a member can demand rescission of the membership agreement and a refund of the joining payment?
The question regarding whether a club should amend its membership documents is important given clubs’ need for flexibility to address a changing membership and market for members. The answer needs careful consideration by club management and its counsel.