The Australian Turf Club’s (ATC) recent saga over the proposed sale and redevelopment of Rosehill Racecourse has become a defining case study in governance, fiduciary responsibility, and boardroom dynamics. On 27 May 2025, ATC members voted against the proposal to sell Rosehill, despite strong support from the majority of the board. This decision has not only shaped the Club’s financial future but also exposed the tensions and risks that arise when strategic vision collides with member sentiment.
Rosehill Racecourse: A Legacy Asset
Rosehill Gardens is one of Australia’s most iconic racecourses. Located in Western Sydney, it has been a cornerstone of the nation’s thoroughbred racing heritage since its opening in 1885. The venue is home to some of the country’s most prestigious races, including the Golden Slipper Stakes, and has long served as a hub for both racing and community events.
The Australian Turf Club, formed in 2011 through the merger of the Australian Jockey Club and the Sydney Turf Club, owns and operates Rosehill Gardens along with three other major Sydney racecourses: Royal Randwick (leased from the NSW government until 2107), Warwick Farm, and Canterbury Park. As custodians of these venues, the ATC’s directors are responsible not only for their financial stewardship but also for preserving their cultural and sporting significance.
Legal Duties of Directors: A Refresher
Under the Corporations Act 2001 (Cth), directors are bound by several core duties, including:
– Section 180: The duty to exercise care and diligence.
– Section 588G: The duty to prevent insolvent trading.
These duties require directors to act in good faith, in the best interests of the company, and with informed judgment—particularly when the organisation’s financial sustainability is at stake.
Financial Fragility and the “Going Concern” Warning
The ATC’s 2024 Annual Report paints a picture of financial strain. While the Club reported a modest total comprehensive (net) income of $570,000, which is a very thin profit margin on total revenue of $372 million, potentially more concerning is the “going concern” note in the financial statements, which reveals that current liabilities exceeded current assets by $16.2 million. Current assets include cash, receivables, and inventory that are expected to be converted into cash within 12 months. Current liabilities are obligations due within the same period, such as accounts payable, short-term loans, and accrued expenses.
When current liabilities exceed current assets, it suggests the company may not have enough readily available resources to meet its short-term obligations as they fall due. This imbalance can lead to cash flow stress, missed payments to creditors, and potentially, insolvency.
The note also highlights that the club’s $30 million fully-drawn loan facility with the Commonwealth Bank expires in October 2026. Expiration of bank finance facilities necessarily create heighted exposure to a borrower.
The Club’s reliance on wagering revenue—already in decline—further compounds the risk. The report makes clear that the Club’s ability to meet its obligations depends on stable trading conditions, continued support from Racing NSW, and the absence of adverse events. The proposed sale of Rosehill was positioned as a strategic response to these risks, offering a path to financial independence through diversified income streams.
The note also highlights that the Club’s ability to sell assets to raise funds is constrained by the need for member approval and Racing NSW consent. This limits the board’s flexibility in responding to financial stress.
Red Flags for Directors: When Insolvency Risks Arise
The Corporations Act does not require a company to be actually insolvent for directors to face liability—potential insolvency is enough to trigger risk. Directors must be alert to early warning signs, including:
– Persistent operating losses;
– Negative working capital (eg when current liabilities exceed current assets);
– Inability to pay creditors on time;
– Reliance on external funding to meet obligations;
– Delayed payments from key revenue sources;
– Restrictions on asset sales or refinancing options.
If these indicators are present, directors must take proactive steps to assess solvency and document their decision-making processes. Failure to do so can expose them to personal liability under section 588G.
A Divided Board: Public Dissent and Its Fallout
The ATC board was not united in its support for the Rosehill proposal. Chairman Peter McGauran and a majority of directors publicly endorsed the sale, citing the long-term financial benefits and the need to modernise member facilities. However, three directors opposed the plan and took the unusual step of emailing all ATC members to outline their concerns.
This public airing of internal disagreement played out in the media and among the membership, creating a perception of division at the highest levels of governance. While dissent is a natural and sometimes healthy part of board deliberations, its public expression can damage an organisation’s reputation, erode stakeholder confidence, and complicate decision-making.
The fallout was significant. The public split undermined the board’s collective authority and distracted from the merits of the proposal itself. It also raised questions about how the board manages internal disagreement and communicates with its members.
Who Bears the Risk? A Legal Paradox
While dissenting directors may believe they shielded themselves from liability by opposing the sale, the legal reality is more complex. The Rosehill proposal was not merely a property transaction—it was a potential financial lifeline. By opposing it, dissenting directors may have increased their exposure to claims that they failed to act with due care and diligence in the face of mounting financial risk.
If the Club’s financial position deteriorates further, and the board is unable to implement alternative solutions of similar scale, dissenting directors may be asked to justify how their opposition aligned with their duty to act in the best interests of the Club as a whole. Courts and regulators will consider whether their decision was informed, reasonable, and supported by expert advice—or whether it was driven by sentiment, tradition, or political pressure.
Risk Exposure and Mitigation Strategies
The rejection of the Rosehill sale leaves the ATC exposed to several risks:
– Liquidity pressure: With limited options to raise capital, the Club may struggle to fund necessary upgrades or absorb further revenue declines.
– Debt constraints: The Club’s ability to sell assets is restricted by Racing NSW agreements, limiting financial flexibility.
– Reputational damage: The public board split and the failed proposal may affect stakeholder trust and future member engagement.
To mitigate these risks, the board could:
– Revisit and revise its strategic plan with input from all directors and key stakeholders.
– Explore alternative revenue streams that do not require asset sales.
– Strengthen internal cohesion and present a unified front in future communications.
– Engage members in a transparent dialogue about the Club’s financial realities and the trade-offs involved in maintaining Rosehill.
Conclusion
The Rosehill decision is a powerful reminder that governance is not just about compliance—it’s about leadership, judgment, and the ability to navigate complex stakeholder landscapes. For directors, the case underscores the importance of fulfilling their statutory duties, managing risk proactively, and maintaining board unity even amid disagreement. For dissenting directors, it is a cautionary tale: opposing a strategic proposal may not absolve you of liability—especially if that proposal was the most viable path to financial sustainability.
Robert Powell FCA GAICD is the founder and managing director of Family Boards Pty Limited, a specialist consultancy helping companies achieve best practice in board governance and risk management. He is a Chair of the business leader peer support group Leadership Think Tank Australia, an accredited specialist adviser member of the Family Business Association (AU), a Graduate of the Australian Institute of Company Directors, and a Fellow of Chartered Accountants Australia & New Zealand. He can be contacted at Robert@familyboards.com.au
