Interested in buying a racehorse? An introduction to syndicates and what you need to know
Did you know that 1 in every 254 Australians own a share in a racehorse? The growing interest in the sport is not only driven by the fascinating beauty and power of thoroughbreds, but also a large increase in prizemoney awards across Australia. Whether you are a seasoned racehorse owner, or new to the concept of syndication, it’s important to consider some key issues before you invest.
Many people consider investing in a racehorse due to their passion for the sport and in the hopes of winning prize money. Due to the significant costs associated with sole ownership, it is not uncommon for several people to join together to purchase a racehorse. However, arrangements can vary greatly and it’s important to be aware of the logistical aspects, your contractual obligations and the regulatory requirements.
Horse racing in Australia is subject to a comprehensive regulatory framework designed to ensure the integrity of the sport and the welfare of horses. Racing Australia is the national governing body for thoroughbred horse racing in Australia and sets out industry rules and standards in the Australian Rules of Racing. If you purchase a share in a racehorse, it is important that you read and understand the Australian Rules of Racing as they will apply to your investment.
“Syndicate” can be used as a general term to describe a co-ownership arrangement, but may be more accurately categorised as:
Private syndicates: for example, co-owning a horse with family, friends, etc up to a maximum number of 20 people.
Public syndicates: authorised syndicators can offer shares in racehorses to members of the public. “Promoters” must be approved by the relevant Principal Racing Authority.
Generally, a horse racing syndicate will be a managed investment scheme under section 9 of the Corporations Act 2001 (Cth) and therefore subject to extensive regulatory requirements, including the requirement for the person promoting the shares to hold a current Australian Financial Services Licence. There is an exemption available for small-scale horse racing syndicates. You should consider obtaining legal advice and guidance on the regulatory requirements before selling or promoting shares in a racehorse.
Do your research
It’s a good idea to research the syndicate thoroughly before buying shares in a racehorse. You should consider the history of the syndicate, the management team’s experience, and its reputation within the industry. How transparent are they with communication? Regular updates and open lines of communication are signs of a well-run syndicate. Additionally, review their track record in selecting and managing horses.
Visit the horse
If possible, visit the horse and the training facilities. Observing the horse in person and assessing the environment and care it receives may give you additional confidence in your investment. This also allows you to meet the trainers and staff, providing deeper insight into how the syndicate operates. Prospective racehorse owners can consider the welfare of horses at sales by coordinating to view the horse collectively in one session rather than making multiple individual visits, allowing the horse adequate time to rest and reduce stress during the sale process.
The costs involved and risk
Racehorse syndication involves initial purchase costs and ongoing expenses such as training, veterinary care, and stabling fees. Ensure you are fully aware of all potential costs. Reliable syndicates should provide a clear breakdown of expenses and how these will be billed to owners.
There are risks involved in racehorse ownership. Factors such as injuries, health issues, or underperformance can affect your horse's racing career and your financial return. Evaluate whether these risks align with your personal investment and leisure objectives.
Understand the terms
It’s important to have a co-ownership agreement that specifies key elements of the arrangement. It should clearly outline:
The structure of ownership and what percentage of the horse you own.
Who will manage the horse? The manager of the horse represents the owners and has many powers. If you buy a share in a horse, you are putting your investment into the hands of the manager.
How important decisions are to be made – will decisions regarding the horse’s care and racing career be made solely by the manager, or will owners have a degree of control?
How will disputes between owners be resolved?
The process for selling your share and conditions under which the horse may be sold.
The terms covering any winnings distribution and other financial arrangements.
A well drafted syndicate agreement will clarify these issues so that all parties are on the same page. If these critical aspects relating to your investment are not written down and agreed, it can become a very expensive exercise if something goes wrong. Simply being listed as an owner in the Australian Stud Book is not evidence of ownership, but a syndicate agreement provides a written record of your interest. Syndicate agreements and arrangements can be complex, and therefore the contract should be drafted by a lawyer who can also advise on regulatory compliance.
Enjoy the journey
Prizemoney awarded at Australian horse races is surging, fuelling wider interest in the sport. Over the past decade, the amount of prizemoney distributed in Australian horse races annual has increased by over 80%. But being part of a racehorse syndicate isn't just about financial gains; it's also about being part of a community and celebrating the power of these magnificent horses.
Investing in a racehorse syndicate can be a rewarding experience, offering the excitement of racing coupled with the social aspects of attending races and exclusive events. However, it's essential to approach this venture with diligence, understanding both the financial implications and the legal responsibilities involved. By carefully considering these factors, you can ensure that your ownership experience is as enjoyable as it is informed.
PURE Equine Law can assist you with navigating syndicates and co-ownership arrangements, including the preparation of syndicate agreements. Contact us today to speak with an equine lawyer with specialised knowledge in the racing industry.
*Information is general and not legal advice.
Key contacts
Emily Purvis | Principal
Emily Purvis is an equine lawyer based in Perth, Western Australia. After graduating with a Bachelor of Laws and Bachelor of Commerce from the University of Western Australia, she went on to work for international law firm, Herbert Smith Freehills. In 2021, Emily combined her passion for practising law and riding horses to establish PURE Equine Law. With her top tier legal training and 25+ years of experience with horses, Emily provides clients with contracts and advice to protect against legal risks, streamline stable operations and implement best practices. Emily is also passionate about empowering the equestrian community through legal education and preventing disputes by making contracts more accessible.
Georgia Rodgers | Paralegal
Georgia Rodgers is based in New South Wales and a Paralegal at PURE Equine Law. She is currently studying for a Bachelor of Laws and Bachelor of Equine Science. Georgia is an experienced horsewoman and enjoys competing in campdrafting and showjumping competitions across New South Wales. She also has extensive experience in the racing industry attributable to her upbringing on a thoroughbred stud farm and work with racehorses. Beyond competitions and studies, Georgia is committed to engaging with community initiatives that promote equine welfare and education.