Can I become director of management company?

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    Can I become director of management company?

    Would appreciate some advice.

    My flat is within an estate of 48 other "units'. As leaseholders, we are all members of XXXXXX Management Company Ltd and also 'B' shareholders. Currently, there are just two directors, neither of which are leaseholders themselves. The Management Company Ltd employs the use of a Managing Agent, a separate Ltd company which also has two directors and surprise surprise, the same two directors as the Management Company. I have recently requested detailed receipts and invoices of recent repair and maintenance work and in my opinion, is costing at least twice the amount it should. I'm not sure if this situation is common but to me it seems like the fox is guarding the henhouse.

    How simple would it be to apply to be a director of this company (with another 2 or 3 leaseholders) to have a hand on the wheel?

    Thanks

    #2
    The most difficult part will be finding leaseholders willing and capable of being directors. It involves putting in more time that most modern people are prepared to do, especially property investors, and you need to have an understanding of company law, leasehold law, and the lease, and in combination, you need various other expertises.

    Without seeing the Articles of Association of the company, it is impossible to say. The B shares suggest that you may have different voting rights from other members, and it is possible, but unlikely, that B share holders can't be directors. Assuming the leaseholders are the only people with voting rights, and they all have the same rights, three of them can request a meeting to appoint and/or remove directors, and a simple majority of the voting rights at that meeting, exercised in person, or by proxy, can appoint a director.

    If the constitution is more complicated, you might need to change the constitution first, which requires a 75% majority.

    Some of the options above require you to be very detailed in the calling notice and may require up to a month's notice of the meeting.

    The first thing you should do is to read and understand the constitution. If you cannot do that, you should not attempt to be a director.

    Incidentally, there is no right to the accounting details until you have exercise the right to the summary accounts, although best practice is to volunteer those.

    Comment


      #3
      The forum rules are that you shouldn't provide identifying information!

      However the company seems to have voted 75% to do away with AGMs, in 2009, which was probably not in the interests of good governance.

      There are no longer any A shares.

      Only 47, not 48 B shares seem to exist. The share capital suggests 48 should exist!

      I would aim to have five people proposing anything at a general meeting.

      Article 27.1 gives rights to inspect the accounts beyond those due to Landlord and Tenant law (all members can inspect the books).

      Every member has the right to appoint a director, without a general meeting. They can remove that director. This might interact with a clause which also allows directors to be removed for the more normal reasons, and it doesn't seem to be a good idea, as having 47 directors in unrealistic. However, that right does not seem to have been significantly exercised, if exercised at all, and I wonder if the directors have actually read the Articles.

      The SIC code seems to be wrong. I'd expect the RMC code, but code is one that makes more sense for managing agents.

      I think you need to get a company lawyer on board.

      Comment


        #4
        The company has 47 shareholders and is a small company.

        Check the company rules( articles ) if there is any clause to say the directors must be leaseholders of flats at your estate. ? .

        You need atleast 10 % of shareholders to call a meeting to propose 3 new directors who should be volunteers from existing leaseholders . You need 3 new directors to outvote the existing 2 directors. Then your new directors can appoint a new managing agent to take over from the existing MA ( after serving out the notice period required by existing agents contract.).

        Better to plan ahead and find the replacement MA before you start . The new MA should be willing to provide service complying to the RICS Residential Management Code.

        Comment


          #5
          There is no provision, in this company's articles, for a general meeting to appoint directors (without first having a special resolution to create such a provision).

          The articles say that (after the initial sale of the last unit) each "owner" has control over the appointment of at most one director at a time. The directors don't have to be leaseholders, but their appointers do. The directors can then appoint alternative directors to substitute for them when they are not available. Alternative director appointments lapse as soon as their appointing director is not a director. First level directors an be removed by the owner that appointed them, without formality beyond a written notice, and for various other reasons (the statutory provision, certified mental incapacity, non-attendance, etc.).

          It is not clear to me whether an appointment survives the assignment of a share, but if not, I would hope the assignee could remove their corresponding director.

          This is not how director appointments are normally handled.

          All that is needed to become a director, in this company, if you are an owner, who doesn't have a director in place, seems to be to write to the company saying that you appoint yourself as your director according to article 18.4 of the company's articles.

          Where I'm not so certain is that I think that all that is needed to remove the managing agent directors, assuming their appointment survived the assignment of the shares, is to find out who appointed them and to get their successor in title to the shares in question, to write to the company, quoting the same article, and saying that director is no longer in place and nominating a replacement.

          The basic idea seems to be that every owner can be a director, but they have the opportunity to appoint someone with more appropriate skills for the job to act as director in their place.

          As this is, to me, an unusual way of appointing directors, professional advice is probably needed.

          Comment


            #6
            The mismatch between the number of shares on the balance sheet and the number of shares in the confirmation statement suggests that there is an error in the latter.

            Comment


              #7
              The OP should exercise his right to have, free of charge, the complete current constitution, as there is a resolutions recorded by CH which is not available online, without a fee. I suspect it relates to a change in accounting reference date, and I think any resolution relevant here would have required a new copy of the articles to be submitted.

              Comment


                #8
                Thank you very much for you advice leaseholder64. Just to ask a stupid question, who owns the Freehold? Is it the same Management Company?

                Comment


                  #9
                  Not according to the company accounts and articles. It may well share directors with the management company.

                  The freeholder is probably the landlord, for the purposes of ground rent, so should appear on statutory notice demanding any ground rent.

                  However, for the most definitive answer, spend £3 with the Land Registry web site to get the title record for the freehold.

                  Comment


                    #10
                    Thank you so much for your advice. So these directors can't hold their position if the shareholder(s) or director(s) that appointed them no longer hold those positions?

                    Comment


                      #11
                      If they were appointed by another director, they are alternative directors and their appointment ceases when their primary is no longer a director.

                      If they were appointed by a shareholder, it is not clear to me what happens when the shareholder ceases to be one, and the drafting may be flawed, which is why you probably need to talk to a specialist solicitor.

                      To me the obvious spirit would be that the appointment would lapse on the assignment. Failing that, it would only really make sense if the right to control that director was assigned with the shares. However, from the actual wording, I cannot be certain that either of these is how the courts would interpret it, which is why you need expert advice if you want to rely on that to unseat a director.

                      You can always unseat a director by a simple majority vote in a general meeting, as that is allowed by statute.

                      Note directors appointed by other directors, for these particular articles, are alternative directors and cannot vote in a meeting at which their appointer is present. This is different from the normal arrangement, where the board can appoint other directors who have the full powers of a director. As such, the current directors cannot appoint extra directors to outnumber shareholder appointed ones, or to replace one removed by the shareholders.

                      Comment


                        #12
                        Originally posted by Gordon999 View Post
                        You need atleast 10 % of shareholders to call a meeting
                        This is no longer true, and was never entirely true. It used to be 5 or 10% depending on whether the mechanism had already been used in the last year (or there had otherwise been an opportunity to put members motions). https://www.legislation.gov.uk/uksi/...ulation/4/made changed it to an unconditional 5%.

                        In the OP's case, it would have been 5% under the original rules, as it looks like the company was having no general meetings at all, having opted out of AGMs.

                        Comment

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