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Syndication - the debate

What are your views on how best to launch a syndicated a/c in the UK? A) Get the plane first then invite people to join? B) Form the group and then buy a plane? C) 'Costs-only' syndicate vs 'Capital share' syndicate? D) Some other approach? Plus, if you had to rank the top 6 things that a share in a syndicate needs to offer for you to buy-in, what would they be in priority order?

EuropaBoy
EGBW

If you buy the plane yourself and then invite people to join, you can do it on your own terms

I did something very similar 2002 onwards and I can tell you that you are highly likely to get a number of people who think you are a sucker and who try to drive a very hard bargain.

The downside is that you may not find enough suitable people, or not for a very long time.

How to structure is it a big subject (and also taxation e.g. Benefit in Kind comes into it, potentially) but you need to be clear as to WHY you want others to fly it.

If it is primarily to reduce the costs of your own flying (the usual reason) while retaining access so you can e.g. for for a 2 week holiday in Europe with the plane, then a syndicate may not work for you (depending who the others are and their flying patterns). In that case you may want to consider straight rental.

If you have unsufficient money then forming a group initially is your only option, obviously. Then you need to be extra careful to make sure everybody is compatible.

Most syndicates have "issues" of various sorts, but some work very well. Looking at people I know, it seems to me that the syndicates that work best are one of these:

  • 30 members, dirt cheap flying, 1 man looking after the plane and everything else while the others just jump in and go for a Bembridge burger

  • 2 or maybe 3 members, "unlimited" funds so no arguments about fixing XYZ, probably all IFR capable

Administrator
Shoreham EGKA, United Kingdom

In my experience Peter's comments are very true. Worst thing is a small group with members who have either:

  • Very different ability to fund maintenance/upgrades etc
  • Very different desire for types of flying.

A large group with one controlling member softens these issues although a theme makes life easier when deciding on aircraft and equipment in particular IFR stuff.

EGTK Oxford

Yes; the worst I heard about is a group of say 5-10 members, of whom half have an IMCR and the rest are purely VFR.

Any avionics issues will cause a lot of friction and the IFR capable members will try to sell up before too many people outside find out (and prob99 won't disclose the issues to a prospective buyer).

Also a mismatch between mission profiles is a big issue. I know one syndicate where one member does a lot of short flights abroad, and pockets the duty drawback (you have to set the rules up at the outset so that duty drawbacks go back to group funds, for example).

There are a good number of things to consider, as you will appreciate

Personally, I would buy the plane and enjoy it, and only later look for other shareholders. I used to run a "zero equity" group for 4 years and had mostly hassle. Came across some right cases, too... aviation seems to attract them.

I also had some very nice people but they all gradually dropped out (children arriving, lost jobs, etc) and this led to problems with HMRC, which is another story

Administrator
Shoreham EGKA, United Kingdom

Can anyone suggest a template syndicate constitution that they have seen work well?

I'm now thinking the 4-5 member group would be a mistake (it certainly has not yielded much fruit after a 2 year search) and pondering the way forwards as either the 20max member 'zero equity' group, or selling outright.

EuropaBoy
EGBW

I'm in a group that (in theory) has the potential for friction over IFR avionics in the way Peter describes.

I'd say 80% of us have an IMCr or an IR.

However, it's hardwritten into the rules of the group that the aircraft will be maintained to IFR standards - with cash calls if necessary. We make very sure that new members are aware of this.

At the moment we have one chap in the group who would like us to upgrade to a Mode S transponder. This has been discussed, but hasn't caused any friction. The rules of the group around such upgrades are clear, and it simply won't happen until he has more support.

EGLM & EGTN

Graham - I'm a bit surprised. Are you saying there isn't a majority among the 80% of you with an IMCr or an IR who won't support the chap who would like you to upgrade to a Mode S transponder?

EGLM

Pretty much :-)

EGLM & EGTN

I've been in a group of 6 (For a short time 8) since January 1990. Only one problem - a member stopped flying, stopped payments, didn't sell his share. Eventually his unpaid payments ate up his share. A tight agreement seems great - but will legal action to enforce it be financially viable? Buying then asking others to join an equity group could lead to friction if the original buyer sees himself as superior to other equal shareholders. There has to be give and take. Four of us have been in the group for over 14 years. P.S.There have been 2 insurance write-offs in my time with the group.

Maoraigh
EGPE, United Kingdom

Europaboy, email me at cnich15000 "at”yahoo.co.uk if you want some example clauses (from glider agreements, but the principle – and possible pitfalls if you don’t cover all the angles – are similar).

Chris N.

Ridgewell, Essex
30 Posts
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