Nope, no joke. Not like the old: "When is a door not a door?" variety. The answer, is of course, when there are not enough in attendance to form a quorum.

A what?

A quorum. This is the name given to the number of people who must be present by law in order for a meeting to actually take place.

H&G, on 2 occasions I recall, have been unable to hold a legal meeting. Now this, you can imagine, is a tad frustrating to say the least. There I was, having spent many hours researching companies and poring over Company REFS. I had (almost certainly!) highlighted an out-and-out screaming buy, under-researched by Analysts and below all current trend lines. This wonder stock was going to be the next Microsoft for sure. I could hardly contain my enthusiasm as I waited to share my findings with my fellow members... and then not enough are present to hold a meeting. No investment decisions can be made.

In the Club Rules and Constitution (if they have in any way evolved from the ProShare recommended rules) there will be a section about the number of people who need to be present in order for there to be a quorum so that the meeting can legally take place. This could be a set number, or a fixed percentage of the membership. Either way, unless the requisite number of people is in attendance, the meeting cannot happen. And the club will have missed out on the chance to purchase the wonder stock, at least for this month. Some may even feel rightly miffed that they have effectively wasted their precious time, and may feel less inclined to put those hours of research in again for fear of the same thing happening.

Can this be avoided?

Oh yes. You still have to have a quorum, but you can adjust the rules so that the number required to make the quorum is so low that it is more-or-less guaranteed month in, month out. Now, this is the time to apply a touch of realism. Whilst some members may be safety conscious and might feel uncomfortable about a relative few taking investment decisions on behalf of the many, I am afraid I adopt a more flexible approach. My attitude is and always has been that if people want to attend, they will; if they don't then they will find excuses and will not. They may still wish to pay their money in, and maybe attend occasionally, just not every month. Of course it will happen that many people are genuinely unable to make the meetings, and in the main holiday periods attendance levels are stretched in any event. But in my opinion it is no good setting a quorum level at 50% of the membership if generally only 60% ever turn up. Be realistic!

In all my clubs the number required to constitute a quorum is 4. Yes, only 4. And all the clubs are 20-strong with waiting lists. So we are saying that only 20% are needed in order to constitute a legal meeting. Every member knows that, and consequently, since the introduction of the rule, we have never had a failed meeting. Besides, if they don't attend, then they can't criticise the investment decisions. It could be argued that such a rule actually could help boost the attendance. On one occasion (April 1st I think) we had only a four person meeting and contemplated sending a dummy set of minutes out showing that the entire portfolio had been sold, with the proceeds put into the Kurdistan Growth Fund Unit Trust, or something similar! Seriously though, there is nothing worse than turning up to do nothing, and if that happens on a few occasions then interest will wane and attendances will drop faster than Lastminute.com's (LSE: LMC) share price, I promise you.

What happens if we hold an illegal meeting?

Well, probably nothing, to be honest. But if problems are ever going to occur, then you can bet your bottom dollar that it will be over something like this. You can see it now. a meeting without a valid quorum takes place, and in good faith some shares in a company are purchased. For whatever reason, the shares plummet, or, even worse, get suspended and then go bust. There is always going to be some clever dick who discovers that they shouldn't have been bought in the first place, and then at the very least there will be bad feeling. It could even lead to members leaving or the club being wound up.

Is there another way around the problem?

Of course. There are many clubs with a "compulsory attendance" rule, and I am certain that their meetings are enjoyable and successful. I have merely recounted how this particular Fool has chosen to address the problem, and judging by recent threads on the Investment Clubs discussion board it is something of concern to a lot of you out there. Remember, it is your club, with your rules, and if you don't like them, change them. That's what they're there for.

Related Links

• Investment Clubs discussion board
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