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					    Rotary International District
               3310
     DISTRICT ASSEMBLY
TOPIC: DISTRICT INCORPORATION


         Presented by:
      PDG David Tong
         District 3310
 DISTRICT INCORPORATION
• Why incorporate?
• Which jurisdiction?
• Which legal form?
• Issues in structuring the corporation
 - key principles adopted
 - compliance with Rotary Code of Policies
 - M&A
 - registering branch in the other jurisdictions?
• Tax issues
• Transition issues?
• Management structure
     WHY INCORPORATE?

1. District presently operating as non-legal, non-
   registered entity. Not sustainable.
2. Need to protect our assets.
3. Incorporation provides perpetual life, legal status
   & protection.
4. District unable to invest our assets in securities.
5. Request of our major donor, Crocodile
   International.
6. RI Board encourages districts to incorporate.
                  WHICH JURISDICTION?

1. At 30/06/09
  Country        No. of clubs    %     No. of Members     %
  Malaysia           40         62.5        893          54.0
  Singapore          22         34.4        727          44.0
  Brunei              2          3.1         33           2.0
  Total              64         100        1653         100.0

2. Future?
  More scope for growth in Malaysia.
Q: Incorporate in Singapore or Malaysia?
Answer: Malaysia
         WHICH LEGAL FORM?



Q: Should the corporation be a society or company
limited by guarantee?

Answer: Lawyer’s advice is that a Company limited
by guarantee is the correct way forward.
                   ISSUES IN STRUCTURING
                   THE CORPORATION
                               Key Principles adopted
1. Except for the change in legal form, no real change in the operation and
   management of District 3310.
2. Transition should be smooth and seamless.
3. Clubs will continue to function as before.
4. Rights and obligations of clubs in District 3310 and the relationship
   between them and with District and RI will stay the same as before.
5. No club in District will suffer an impairment of its rights when they
   become a member of the Company.
6. Obligation to pay its annual dues to RI and per capita levy to district (as
   before).
7. All assets, liabilities, rights and obligations of District 3310 will be assumed
   by the corporation.
                 ISSUES IN STRUCTURING
                 THE CORPORATION (cont’d)
                           Key Principles adopted

8. Clubs will automatically become members of the corporation.
9. The M&A of the proposed corporation will align with the RI Manual
   of Procedures so that any future change in RI constitutional
   documents will not necessitate a change or revision of the M&A.
10.The liability of each member club will be limited to an amount not to
   exceed RM 100.
11.The Board of Directors of the corporation will decide on the
   management structure.
12.The DG will continue to be the highest officer of the corporation and
   shall be the Chairperson of the corporation.
                  ISSUES IN STRUCTURING
                  THE CORPORATION (cont’d)
                 Compliance with Rotary Code of Policies
RI Board has mandated:
1. Approval by two-thirds of clubs in the district required for
   incorporation in a vote at a district conference, or in a ballot-by-mail.
   Before seeking District’s and RI’s approval need to submit draft M&A
   to RI prior to presenting to the club.
2. Each club shall be entitled to one vote.
3. When a district in incorporated, the corporation and the former
   unincorporated district shall become one entity.
4. The incorporated district shall, in all respects, possess all of the
   powers, rights and privileges and shall perform all of the obligations
   and requirements of a district under the constitution, by-laws and
   policies of RI.
                  ISSUES IN STRUCTURING
                  THE CORPORATION (cont’d)
                    Compliance with Rotary Code of Policies

RI Board has mandated:
5. A district with clubs in more than one jurisdiction may incorporate in any
   of the jurisdictions and shall take steps to register in the other
   jurisdiction(s) as appropriate.

6. No district with clubs in more than one jurisdiction shall incorporate in a
   jurisdiction that would favour one club or Rotarian over another.
                   ISSUES IN STRUCTURING
                   THE CORPORATION (cont’d)
                        Memorandum & Articles of Association
1. M&A has to comply with:
   - Companies Act, 1965 of Malaysia; and
   - Mandatory provisions of RI Board.
2. The key provisions mandated by RI Board as follows:-
a) The corporation shall be a not-for-profit entity, and it shall pay no
   dividend and no part of its money, property or other assets shall be
   distributed to its members, directors, or officers.
b) Where any provision of the corporate documents of the incorporated district
   is not in conformity with the constitution, bylaws, or policies of RI, the terms
   of the constitution, bylaws, or policies of RI shall prevail at all times.
c) In any conflict with the Malaysian law, the Malaysian law will prevail.
                   ISSUES IN STRUCTURING
                   THE CORPORATION (cont’d)
                        Memorandum & Articles of Association

d) All Rotary clubs in the incorporated district shall be members of the
   incorporated entity.
e) The initial membership of the district shall be the Rotary clubs in the
   district as of the time of the incorporation. The addition or removal of a
   club or clubs from a district pursuant to the RI bylaws shall immediately
   and automatically result in a corresponding change in the membership
   of the district corporation.
f)   Only Rotary clubs in the district may be members of the incorporated
     district.
g) The board of directors and officers of the district corporation shall be limited
   to Rotarians who are members of clubs in the district.
                   ISSUES IN STRUCTURING
                   THE CORPORATION (cont’d)
                       Memorandum & Articles of Association

h) The directors of the district corporation shall include the current district
   governor, the district governor-elect, and the most recent past district
   governor who has served in that district, and such other Rotarians, if any, as
   may be determined by the district.

i) The current district governor shall be the highest officer of the
   incorporated district and shall serve as chairman of the board of
   director. The district may elect such other officers as required by local
   law and as provided for in its corporate documents.
                  ISSUES IN STRUCTURING
                  THE CORPORATION (cont’d)
                 Registering a branch in the other jurisdictions?

1. It is provided in the Rotary Code of Policies, section 17.020.3 that “a
   district with clubs in more than one jurisdiction may incorporate in any of
   the jurisdictions and shall take further steps to register in the other
   jurisdiction(s) as appropriate”.

2. In respect of District 3310, this seems to suggest that if we incorporate
   in Malaysia, we should take further steps to register a branch of the
   entity each in Singapore and Brunei. This may be necessary given the
   “doing business” provisions of the Singapore Companies Act.

3. It may not be possible to register Rotary in Brunei. We need to consult
   the Rotarians in Brunei on this matter.
                      TAX ISSUES

As at 30/06/09:                            District Fund (RM)
District Accumulated Fund                       577,241
District Crocodile Endowment Fund               361,537
District Disaster Fund                          100,000
Avoidable Blindness Fund                           8,680
Total (virtually all in cash)                  1,047,458

Attributable to:                     %
Malaysia                            54.0        565,627
Singapore                           44.0        460,882
Brunei                               2.0          20,949
                                100.0          1,047,458
             TAX ISSUES (cont’d)



1. One-time transfer of above capital reserves to the
   corporation and/or branch?
   Professional advice says not taxable.

2. Annual interest and investment income?
   Yes these are taxable.

3. Donations (Crocodile Foundation grants) received for use
   in a future year?
   If accounted for properly, not likely to be taxed.
                TRANSITION ISSUES


1. To decide date for starting up corporation and closing of existing
   District 3310.
2. DG to appoint a Transition Committee to project manage the
   transition issues to ensure smooth transitions. The tasks would
   include transfer of assets, setting up corporate governance
   framework, designing of letterheads, name cards for company
   directors and district officers, communication and public relations
   initiatives, etc.
3. The Transition Committee to be appointed to look into
   incorporating the corporation, setting up new bank accounts etc in
   readiness for the commencement of the operation of the
   corporation.
               MANAGEMENT STRUCTURE



1. Working with the Transition Committee, the District
   Governor and his inaugural board of directors to meet early
   to decide on the management structure of the corporation.

2. A draft template is being prepared to assist in this process.
THANK YOU!

				
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posted:10/2/2011
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