SYNDICATE AGREEMENT

[Methusala]

G'day Flyers and All, I wonder whether there are some open-hearted people out there who belong to an aircraft sharing group and have a written agreement or M of Understanding that they may share. I have been thinking of points and these are the ones so far thought of :-

 

1. 1. All decisions should be by consensus. However in the event of a disagreement a simple majority vote will be binding on the syndicate.

 

2. 2. Only syndicate members with current qualifications to act as pilot in command.

 

3. 3. All costs of normal (non-flying) operations are to be shared equitably between all syndicate members.

 

4. 4.The syndicate will pay rent to the owner of the land on which the aircraft is based.

 

5. 5. A dedicated and complete set of accounting records shall be kept by a person authorized by the syndicate.

 

6. 6. A dedicated bank account will be maintained to receive and disburse funds involved in syndicate operations.

 

7. 7. Pilot in command accepts all responsibility and consequential liability both personally and materially related directly or indirectly to his actions while he is operating the aircraft.

 

8. 8. If a member wishes to dispose of his share, the other members shall have first refusal in purchase of that share jointly in the first instance or else individually.

 

9. 9. Any application from another person to purchase a share in the syndicate shall be put to a vote of existing members. A majority decision by the syndicate members is required to allow such purchase. Any further suggestions or (grrrr...) criticisms welcomed. Kind regards to all, Don

 

 

[RKW]

Hello Don, Another one for your list.

 

The aircraft shall be kept fully insured at all times. In the event of a mishap, the PIC shall pay the insurance excess in full. Regards, Bob

 

 

[RKW]

and another couple.....A hanger key will be supplied to all sydicate members.

 

The aircraft will be operated exclusively on avgas/mogas. (depending on engine type).

 

All members will be checked by an instructor or a nominated pilot as per the insurance policy for the aircraft.

 

Regards, Bob

 

 

[Methusala]

Thanks for the suggestions, Bob. Don

 

 

[djpacro]

There was a comprehensive thread on this subject a couple of years ago. I would've posted something like:

 

Of course, if you seek legal advice I would expect that advice to be to protect against any legal liability regardless of the level of risk. I've been in a large group as a limited liability company and it worked pretty well in that situation. Question – would an incorporated association provide a similar level of protection?

 

In smaller groups, simply a written agreement and or even just a handshake has sufficed for those that I am familiar with, including myself. Risk mitigation is achieved by careful selection of the partners – that, in my opinion, is the single most important factor for groups with a small number of people. With a larger group and a formal structure you would expect that the majority would take a reasonable view when it comes to disputes.

 

Although I have observed how reasonable people can take an unreasonable view when it comes to significant amounts of money. Regardless of what is in a written agreement if some-one chooses to ignore that what action can one take? So, it is important to have a dispute resolution process in any agreement, with timescales for escalation.

 

A good financial operating system doesn't require a limited liability company to follow rocket's recommendations for costing the aeroplane and charging pilots to fly it. A partnership of 2 or 3 may have a joint bank account and run accounts for expenses and payments by members.

 

The general view is that a monthly fixed payment plus a direct flying charge is the fairest. The long term costs are the hardest to estimate and allow for. Engine overhaul fund is fairly straightforward but what about a fund for repainting? General fund for depreciation? If a limited liability company then there are statutary requirements for the accounts which generally don't represent a practical view of an aeroplane's costs.

 

Some extracts from an agreement which I am familiar with follow. It has some elements which obviously won't work without reasonable people involved or a larger body of people enforcing them.

 

 

The Aircraft’s home airfield will be XXXXXXA schedule of Flying Fees is shown in Schedule x attached and as modified by unanimous agreement from time-to-time.

 

The Syndicate Members agree to take out and maintain throughout the duration of this Agreement the types of insurance and amounts of cover specified in Schedule x

 

If the Aircraft is damaged by a Syndicate Member, then that Syndicate Member shall contribute either the excess payable under the relevant policy of insurance (if any) or (if none or if insufficient) pay the cost of or balance of any repairs or replacements needed as a result of the damage so as to restore the Aircraft and the Associated Equipment and/or Additional Equipment to the condition it was in prior to the damage occurring.

 

For the duration of this Agreement, Syndicate Member's must not sell, charge, encumber or otherwise dispose of their share in the Aircraft except as provided for in this Agreement.

 

If a Syndicate Member wishes to sell their share in the Syndicate ("the Share") then the following procedures must be followed:

 

(i) the Syndicate Member (called the "Vendor") must make a written offer to sell the Share to the Syndicate

 

(ii) the offer must be communicated in writing to all existing Syndicate Members

 

(iii) the price must be the market price for a proportional share of the Aircraft and Associated Equipment

 

The Syndicate shall have six weeks from the time of receipt of the offer within which to accept the offer. Acceptance of the offer must be made in writing. Settlement of the offer must be completed within one month of acceptance.

 

If the offer is not accepted in writing by the Syndicate within the six week period, or if the Syndicate advises the Vendor in writing prior to the that time it does not wish to purchase the Share, then on the earlier of these dates the Vendor shall attempt to sell his Share of the Syndicate on the open market. If no buyer satisfactory to all the other Syndicate Members has been found within three months of this time (and in this respect the other Syndicate Members shall have full discretion as to whether or not to accept the proposed assignee of the Vendor’s Share) then at the end of that three month period the whole Syndicate will be liquidated.

 

If the sale of the Vendor’s Syndicate Membership has not been completed under the terms of clause xx, then the Syndicate as a whole shall be liquidated.

 

The Aircraft and Associated Equipment will be immediately advertised for sale at a realistic market price unanimously agreed by all Syndicate Members so that a buyer will be reasonably expected to be found within four months by private treaty sale or by auction. If by auction, then the auction will be scheduled for a date agreed by all Syndicate members or, fifteen weeks from the date when the last Syndicate Member received notice in accordance with clause xx.

 

Should a majority not be achievable then the dispute shall be submitted to arbitration in accordance with, and subject to, the UNCITRAL Arbitration Rules. The appointing and administering body shall be The Institute of Arbitrators and Mediators Australia (IAMA). There shall be one arbitrator, the language of the arbitration shall be English, the place of the arbitration shall be Melbourne.