Monday 1 September 2014

Northern Racetracks and Part 3 of Dealing with Owners Exiting from Syndicates

It was really interesting talking to a number of our owners who went up to York for the Ebor meeting. There was a really strong consensus that York’s flagship racing festival manages to get almost everything right, and owners and race-goers are really well looked after, not least with the best value Champagne of any course in the country. Perhaps more importantly, they bumped up the prize-money this year by another £0.25m to a record of £3.5m and guaranteed place money down to 6th for all 25 races, thereby ensuring that each race was worth not less than £40,000. Well done to everyone involved in this at the Knavesmire. If only this could be copied by other so-called “festival” meetings, as owners we’d have a bit less to grumble about.

At a much lower level, also well done to Thirsk which has also boosted prize-money recently, and with a few exceptions every race there is now worth at least £5,000. Even beautiful Beverley is doing its bit for the owner experience, their latest idea being a wide selection of home-made cakes in the O&T bar. Go racing in Yorkshire! Which all adds to the reasons why we’re such positive supporters of Karl Burke in Middleham.

In the last couple of blogs I’ve been looking at some of the issues involved in terminating syndicates and exiting from horses. I’ve been arguing that partnership agreements must have an indication of the likely term of the syndicate, and that there are reviews, particularly after two years, that enable owners to leave. I am particularly against open-ended syndicate agreements where horses are kept in training even though they are distinctly moderate, but are really only running to generate fees for the syndicate manager.

One of the difficult situations to deal with, though, is when most of the owners want to stay with the horse, but one or two want to leave. This is particularly compounded when an owner decides to exit regardless by giving an ultimatum to co-owners, normally along the lines of: “I want out and I don’t intend to pay any more money.” It definitely helps if the written agreement maps out a number of principles and scenarios, such as:
  • If one partner wants to end their involvement, they should at their cost attempt to sell their share to a third party, provided it is offered to other partners who have first refusal.
  • If several partners wish to do the same, then again they can try to sell their shares privately, but if not the horse can go into a public auction to establish its market value (and it will be up to the continuing partners to buy it back if they want to).
  • If one or more partner(s) want to sell their share(s) without going into a public auction, then two independent valuations need to be obtained, with the average of the two valuations being the basis for share buy-out, again with the cost borne by the partner(s) wishing to sell. There is no obligation on the other partners to buy the share(s).
  • In all of these scenarios, there should be a requirement to continue paying training fees for a defined period, e.g. three months, or until the next available suitable sale.
  • Finally there can be the very unpleasant scenario where an owner backs out precipitately, leaving the rest of the owners to pick up the pieces. This is clearly unacceptable. It should be made clear that they forfeit their share of the horse, but that will be ineffective if the horse is moderate and has little or no value. In that situation there are then only two remedies: legal pressure to pay (with threat of court action), or getting the non-paying owner on to the BHA’s Forfeit List, thereby ensuring that they will not be allowed to become an owner in British racing again.
The more explicit agreements can be, the better. However, the real key is everything to do with the horse, its training and wellbeing being actively communicated on a regular basis and at the same time, keeping very open communication with all the partners so that if anyone is becoming disillusioned and wants to terminate their involvement, it can be discussed as early as possible, in the most constructive way. Alas, however, human nature being what it is, there are always some individuals who adopt completely unreasonable behaviour. Hopefully you don’t encounter them in your syndicates or partnerships!

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