Block Management Bill

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    Thanks but I have no knowledge of what a D&O policy is?
    The money was paid out by the former Chairman on his own authority with no input or agreement by any other person. He then asked for the money back much later after the BM company took charge. they paid him up quite quickly and then set about trying to recover via service charges. As that failed they may now attempt another route....and I was wondering if by charging shareholders they have a route to obtain monies from us even though years later.

    So yes, the previous director acted without any authority i would say.
    There is no sinking fund or reserves to speak of.


      D & O stands for Directors & Officers and such an insurance policy allows claims to be made in case of error by the acting directors.

      The directors should not have agreed to repay the Chairman, they should have said that they would try to recover monies on his behalf and repay him if and when they succeeded. They acted incorrectly by paying monies out of the service charge funds.

      There is presumably a hole in the service charge accounts which needs fixing.

      If there is no D & O policy in existence, the Company can either collect monies from the directors personally, in which case no-one would volunteer to act as a director, or it can raise monies from members by ordinary resolution as suggested earlier.

      If none of those methods succeed, the Company will always be short of funds and the directors would need to consider whether or not the Company can meet its liabilities and consider carefully if it would be able to pay before entering into any large contract. The directors may decide that the Company cannot continue and should be liquidated and a new Company may need to be formed.

      It is important therefore that a meeting of members is arranged so that you can all consider the options.


        The BM company has funds to cover all current invoices and expenses. There was a sinking fund before that was used to pay back the former chairman. This was the BM company doing this.
        So no issues on funds but a worry that these historical charges will be put onto the owners.
        I was asking how to defend this as no official loan was ever agreed really with the Res. Chairman before and prior to the BM taking over.


          I think that there must be an issue with funds because the BM Company had no right to use the sinking fund and it is required to account for those monies to the leaseholders. If that was the BM Company way of doing things at the time, it was wrong. The loan was agreed when the BM Company repaid the Chairrnan. I think that you need to hold a meeting of members/leaseholders to decide your options. There now seems to be an additional alternative that the leaseholders can agree to write off the sinking fund balance and not pursue their rights against the BM Company.


            In #13, you stated that the BM Company tried to recover monies from you, presumably as service charges. That seems to conflict with the explanation that it used the sinking fund #18.

            “Winning” at a Tribunal can be a pyrrhic victory if it results in the BM Company having a deficit which is ultimately paid by the members/leaseholders. You could apply to the former Chairman and ask him to repay the monies but don’t hold your breath.


              #13 and #18 are correct. The BM raised service charge invoices to try and recover funds they had paid Chairman [part from sinking fund and approved by another director) and further amounts that they say are still owed to ex chairman apparently. They are considering using a 'directors loan' route to recover monies to pay back ex chairman. That is what I wonder about and is it correct for them to do this?

              You say the loan was made 'official' when a payment was made back to the ex-chairman, am I correct in my understanding?
              If so, it seems I am at the mercy of the BM now then.


                I should contact the current directors and advise them that no further payments should be made to the former Chairman and that they are not permitted to use trust monies for that purpose.

                A “director’s loan” in itself does not create grounds for charging leaseholders or members so I cannot see how the Company can make any charge, it is not an expense. Similarly the repayment of a loan does not create an expense which may be charged to leaseholders. The Company has failed to succeed with a claim to recover the underlying expenses so it cannot attempt to do so again. As explained previously, the only way it can try to raise monies in respect of payments made to the former Chairman seems to be by ordinary resolution passed by the members.

                You stated in #18 that there was no official loan from the former Chairman to the BM Company. I think that the act of repaying the loan by the BM Company confirmed the existence of a loan to the extent of the repayment. Whether or not the directors were acting within their powers is another matter.

                You have plenty of options. You can contact the directors for a start. You can request a meeting of members to discuss the matter. If there is a resolution to raise monies, you can vote against it. You can propose a change of directors. You also have your leaseholder’s rights in case the Company attempts to raise unreasonable service charges.


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