Airborne_Again wrote:
My understanding is that no aeroclub in Sweden has ever gone bankrupt. Sure, there have been cases of clubs shutting down, but not with net debt. But then clubs in Sweden are always tax exempt non-profit organisations.
My understanding as well.
Peter wrote:
We have had this debate of “club” v. “school” many times. No matter how one constructs the operation, the money received has to at least equal money spent And if you have people pre-paying lessons (to get a discount, obviously, otherwise nobody would prepay) and selling “trial lesson” vouchers, then you can run the operation with a deficit in assets but without a deficit at the bank.
Yes, you can. But what exactly is a club? A club can be many things of course, and I don’t think the word has any legal meaning in itself. It’s all about how it is organized, under which “jurisdiction” it operates. All aeroclubs in Norway (that I know of) operates under NLF. NLF then specifies how a club is to be organized. There are laws about it. There really isn’t all that much, and the essence is:
A club cannot just go ahead taking up a huge loan and purchasing a brand new aircraft for € XXXk without this has been decided at the yearly meeting or, as often happens, at an extraordinary “yearly meeting” for such particular things. Every member has equal rights, and every member is liable for what the elected management do, but only if this is within the frames of what the yearly meeting has set. It’s not a business, it cannot “go bust” in the usual sense, because every member is liable. As long as the members have assets (income, house, businesses, money in the bank), that is what an eventual civil case will go after. If the management go beyond their frames, then they become personal liable. All this is simply civil law as usual, bound by contracts between individuals. I have never heard of such a thing happening, though. Liability insurance is of course mandatory for each individual 
If you have prepaid, and the club shuts down, there is no doubt about it, in a civil case, you will win. It’s only that theoretical case where all other members have vanished. In my club there are always a couple of persons who have pre-paid, but are now dead or old and senile. It happens from time to time we have to seek them up, or their relatives and ask them what to do with the money. The usual answer is to consider it as a donation.
Money in a club, is money in the bank, only with poor interest rates Prepaying to a commercial company is a gamble with your money.
The more basic Q is whether you offer a discount for x hours if the student pays in advance.
If Yes then where does that money go?
If No, and you never sell flight vouchers, then there is no reason to be owing money (well, apart from unpaid wages, which in the UK are a preferential creditor) when the operation folds up.
Peter wrote:
The more basic Q is whether you offer a discount for x hours if the student pays in advance.If Yes then where does that money go?
Yes. Typically around 10% discount, but dependent on how much is prepaid. I don’t remember the exact numbers. The way it works, in our club at least, is every person/pilot has a separate account. That account is of course just a virtual thing (aren’t all accounts ? ), so the money ends up in the big pot, which of course reflects the whole reason to offer a discount: to boost the liquidity, to get money IN.
It’s the legal structure that is different from a company. In a club, what you actually do in legal terms, is to lend out money to all the other members, or the “club” as such (owned by every member). When flying, the club pays you back in flight hours. When you put money in a company, you really have to read all the fine print to know what exactly you are doing. But in essence you simply pay for something that the company may, or may not deliver in the future. If the company go bust, your money is lost with it. A golden rule is to never pay in advance At least you should know there is a risk by doing it.
Doesn’t this support what I said about schools and clubs being the same thing IF they offer discounts for advance payments, when the operation goes bust?
Peter wrote:
Doesn’t this support what I said about schools and clubs being the same thing IF they offer discounts for advance payments, when the operation goes bust?
Maybe, but clubs in Scandinavia don’t go bust. Not that they can’t, theoretically speaking, but they don’t.
How is that arranged?
Peter wrote:
How is that arranged?
Same as France? you don’t make/distribute money, you don’t pay full-time salaries, you do own maintenance, you charge admission fees and you don’t pay taxes…it’s not run as profit buiness, so as long as you own the hangar & assets and use some public runway (for free), I can’t see how it will go bust? also most accounts are public, if you wanna have a look
COVID did really hit hard on light aviation, big ATO buiness managed to keep the wheel going as per DFT/CAA allowance for un-interrupted commercial training but the CAT picture is starting to get gloomy, “Small clubs & airfields” went for very narrow & policed interpretations of DFT/CAA guidances, which simply means shooting themselves in the foot, I don’t think many have discounted that most restrictions would stay for more than 2 years, those who kept “the light touch version” are still running but not sure for how long…
As @Peter says nearly all ‘flying clubs’ in the UK are businesses and not clubs at all.
As @MattL says a ‘club’ in the UK (as most of us would understand it) is not a legal entity and has no official status. True clubs (i.e. almost universally not flying clubs) would be understood by most people to be something run by the members for the members and owned by the members. No beneficial owner and no-one making a personal profit, though it may employ staff and perhaps turn over quite a lot of money.
Because a ‘club’ as described above is not a legal entity, the question arises of what happens in case of liability to a third party. Legal opinion is that members could in theory be (jointly) personally liable, and for this reason that the two private golf clubs (i.e. real members’ clubs, no beneficial owner) I am a member of have set up limited companies to run the day-to-day operations and hold the assets, with the members as shareholders.
I would prefer it if we had a system similar to that which exists in some other countries, where a club is a legal entity with its nature defined in law and perhaps use of the word protected to stop businesses calling themselves clubs.
Airborne_Again wrote:
Maybe, but clubs in Scandinavia don’t go bust
That’s the whole point. From the outside many of them may look like a duck, and may quack like a duck, even fly like a duck, but they certainly are not ducks
Peter wrote:
How is that arranged?
That’s another funny thing. I don’t know about Sweden, or France or Germany or anywhere else, but in Norway there are no laws specifically governing how such clubs shall be organized or run, it’s all up to the people starting it. In legal terms, the word club has no meaning, another term is used legally: “Forening” which google translates to association, which probably is a good translation, but not necessarily accurate legally. For an association to be a legal entity, it has to be registered, and that’s the only laws about it. An association as a legal entity is an entity where the owners/members cannot receive profit and not receive assets from that entity. In practical terms it is business as usual. Associations can hire people, own property and so on, even own companies AFAIK (but by then things start to get complicated and risky, and another, much more regulated by law non-profit organization is usually used; google translates it to “foundation”)
I think it’s the term “go bust” that is the key here. An ordinary company will go bust if more money goes out of the company than goes into it. People are dependent on that company to make a living, which is the whole point of starting a company. Making money, make a living. No one in their right mind would start an association to make a living. The persons owning a company also have limited liability. This means that it can go bust. For an association there are no limits in principle, the owners/members own all assets positive and negative 100%
You start a company to use your time to make money. You start an association to use that money in your spare time together with others.
