Setting up a syndicate

Anyone can set up a racehorse syndicate.

Before you embark on this venture, be absolutely sure that you understand the associated responsibilities.

Regardless of whether or not you plan to run this on a non-profit or for-profit basis, you will be inviting members of the public (consumers) to join the syndicate.

You are bound by law to comply with consumer legislation. Effectively, the components of The Consumer Protection from Unfair Trading, Regulations 2008 apply. Breaching these Regulations can lead to criminal prosecution, so, rather obviously, it is essential that you get this right from 'the word go'.

Apart from being in your own personal interest, your clients (syndicatees) are more likely to stay with your syndicate enterprise for longer if they can see that the terms and conditions are consumer friendly and legally compliant.

STOP NOW - if you do not plan to invite strangers to your enterprise, through a website, an advertisement, word of mouth, or by any other method BUT instead plan to privately invite friends or family, then you are probably creating a PARTNERSHIP, which is a different structure with different (albeit not dissimilar) liabilities.

The most important element of setting up a syndicate is to find the right horse. Having a knowledge of what to look for is IMPERATIVE. If you have little or no knowledge of how to identify 'the right horse' without total reliance on outside advice and influences, you really should stop and question whether or not this venture is for you.

Rather sadly, some people go to the sales to buy a horse that merely matches a budget and are happy to come back with a horse with no scope other than it has four legs and will therefore be ideal for syndication to consumers who will have equally limited knowledge of 'what to look for'. Such syndicate enterprises rarely last long, particularly when/if the horse takes part in races.

Remember that people will be placing their money and faith in your hands. You have a responsibility to get everything right from the outset. Racehorse syndication is not an ideal enterprise for amateurs.

Assuming you know your stuff and you get the syndicate up and running, you become the Syndicator and your customers become the syndicatees. Your solicitor should examine your terms of business.

As a Syndicator, you will need to have a sound business relationship with the chosen trainer of the racehorse. The NTF (National Trainers Federation) insist that there is an agreement with specific terms and conditions between the trainer and the responsible person (in this case - the Syndicator).

Trainers' terms and conditions vary in detail and therefore any lien or relevant condition imposed by the trainer that may influence a syndicatee's decision to join the syndicate, should be properly portrayed by the Syndicator.

If you create a website to publicise your offer to consumers, you will benefit by recognising the importance of transparency. Most consumers who are looking to become a syndicatee, recognise and appreciate the significance of transparency. The most obvious requirements of 'best practice' are that the costs and a full set of terms of conditions are unambiguously portrayed on the website. Consumers are not likely to be impressed if they are obliged to phone for essential information. In other words, the more transparent you are, the greater the chance that you will get the business.

NEVER specify in your marketing material that the purchase of a share in a racehorse is an 'investment'.

If you are creating a leasing arrangement, as opposed to offering the sale of part-ownership shares, this needs to be VERY clearly portrayed.

Even if your leasing arrangement is effectively bestowing beneficial ownership rights upon the share purchaser, this needs to be clearly portrayed, as the syndicatee is likely to seek peace of mind and protection of his financial interest in the horse and is likely to be mindful that if your enterprise should be liquidated, his asset (his share) could be the target of creditors, particularly because the syndicatee is not likely to be party to the Syndicator's business. Whilst this conjecture is a matter of legal debate, syndicatees are likely to prefer the safety net of actual part-ownership. In other words, when buying a share, the property is simply transferred from the Syndicator to the syndicatee.

VAT treatment should be treated with the utmost seriousness. The entire racing industry holds considerable store in the HMRC concession that allows syndicatees (normally with a 5% share or thereabouts) to reclaim the VAT they have paid in the process of acquiring and maintaining a share. This 20% refund can be a significant sum.

'Best practice' dictates that the Syndicator shall be responsible for collecting the VAT refund from HMRC and treating it as a syndicatee's income, in much the same way that race prize money is distributed during or at the end of the syndicate period. All income needs to be properly accounted for and lodged in each syndicatee's account.

Once a syndicatee pays you for a share, good business practice dictates that you issue a share receipt or certificate. For example, if the shares are being sold in 5% units and your syndicatee buys the fourth available share from the twenty being sold, the receipt/share certificate should clearly state the share number as 4/20. This helps the syndicatee to see that the syndicate has been sold in accordance with the offer and that the ongoing fees properly reflect the relevant proportion. For example; shareholder 4/20 would not expect to be paying for anything more than 5% of the costs and share numbering enables him to quickly establish that he is paying his fair share and not subsidising other shareholders.

A strong communication channel is an expectation of most syndicatees. The stronger and more frequent this is, the greater the chance of client retention. Don't be afraid to relay any bad news as well as all the good news. Most syndicatees are aware that there are generally more downs than ups associated with the training and racing of a racehorse.

The BHA introduced a Code of Conduct for Syndicators on 30th August 2017. This can be viewed by clicking here.

Where applicable, you can register a particular syndicate for VAT through the BHA's agent 'Weatherbys Ltd', by submitting a D2 form. To access the form, click here.

Each participant in the Syndicate should be aware that they are bound by the Rules of Racing. Particular attention should be drawn to those Rules prohibiting the sharing of Inside Information (Rule (A)36) and prohibiting the Lay Betting of owned horses (Rule 92).

The above information does not constitute legal advice. The services of a solicitor should be sought when setting up a syndicate.

The following template is merely a rough guide/example and relates to an arrangement where the Syndicator has purchased a racehorse speculatively in advance of forming a Syndicate and now offers equal shares for sale. RSACA recommends that all Syndicators seek legal advice when preparing a contractual agreement and a set of terms and conditions.

  1.   is the name of the syndicate business, which is owned by the Syndicator  
  2. The Syndicator's address is  
  3. The name of the racehorse being syndicated is  
  4. The date of birth of the racehorse being syndicated is  
  5. The sire and dam of the racehorse are  
  6. Each share shall represent xx% of the ownership of the horse.
  7. Each Syndicatee may purchase up to  % of the shares.
  8. The share pricing strategy is  
  9. All shares are sold subject to the attached terms and conditions.
  10. All management decisions relating to the training and racing of the horse, shall rest with the Syndicator alone.
  11. The Syndicator will, where applicable, seek a refund from HMRC of the VAT payment made by the Syndicatee and credit the full sum to the Syndicatee's account.
  12. The Syndicate start date is   and shall end on  , in accordance with the terms and conditions.
  13. The Syndicatee will not be asked to provide any additional funds to the Syndicator during the syndicate period.

I have read and accept the terms and conditions relating to this agreement.