Right to Manage - Process Questions

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    Right to Manage - Process Questions

    Hello forum,

    Very brief summary of my situation. I own a flat (110 years left on the lease) in a big old Victorian house in London. 11 flats in total, all leasehold. Fairly standard stuff.

    The guy who owns the freehold also does the property management via his own company. I'll call him Mr Freeholder.

    There is a limited company already in existence which has 11 shares (each leaseholder owns one share). The secretary and sole director of this company is Mr Freeholder.

    The property management service Mr Freeholder provides is terrible. Having spoken informally to most of the other leaseholders, there's a general view that the situation is unsatisfactory and that we'd like to use the "right to manage" framework to get rid of him and manage the property ourselves. We would need to appoint a new director (or directors), which I'd be happy to do to get things going.

    Can anyone advise what the process would be for removing Mr Freeholder and appointing new director(s)? Is it a case of arranging a shareholders' meeting and having various shows of hands? Mr Freeholder is a director but not a shareholder, so is he entitled to attend any shareholders' meeting?

    A particular problem is that 8 of the 11 leaseholders don't live in the building - they've bought the flats as BTL investments and they themselves are scattered far and wide. So getting 6 people in one place at one time might be difficult. Is there a way of taking a vote "remotely"?

    I'm going to need to brush up on company law at some point I think...I believe Mr Freeholder is a qualified company secretary so he will no doubt know these procedures in and out, but I don't want to approach him at this stage.

    Thanks
    A

    #2
    Exercising RTM is not a sensible idea when you already have an RMC, as you do. If you are not satisfied with the management call a general meeting an appoint additional directors, or even remove the freeholder s director. I assume the company articles, at ,east, allow any leaseholder to be a director, and do not give the freeholder a built in majority.

    (RTM does change the regime for approvals, but that doesn't seem to be your issue.)

    Your big problem will be finding people willing and able to be directors.

    Comment


      #3
      Thank you. Hmmm...RTM...RMC...ok...so the RTM process isn't necessary here?

      I'd be happy to act as a director myself. Would we need more than 1 director?

      As I understand it (from my limited understanding of articles, etc.) it's one share, one vote - and the leaseholders own all the shares so it's one vote per leaseholder and none (?) for Mr Freeholder.

      If I called a general meeting, what if a majority (6+ from 11) can't attend (eg owner of flat next door is in Sydney)? Does that matter?

      Assuming we're able to make this change, can the new board (which might just be me) simply inform Mr Freeholder than his property management services are no longer required? Would the RMC have the right to instruct Mr Freeholder to hand over all the relevant info to allow a smooth transfer (eg. all existing contracts for cleaning, refuse collection, insurance, etc.)?

      A

      Comment


        #4
        If you actually had an RTM, the freeholder would also have a vote, so your current arrangement gives you more power.

        A shareholder who cannot attend a meeting can appoint a proxy. It is a criminal offence for the calling notice for the meeting not to point this out.

        The majority required is of those attending in person, or by proxy, not of all the shareholders.

        You will have to follow the contract terms for terminating the contract with the managing agent.

        The freeholder only holds the information on behalf of the company; they are somewhat akin to an employee of the company, so they can be instructed to hand it over.

        Companies produce better decisions if they have more than one director. Five is often considered optimum. RTMs need at least two, as do older companies of all types. You should check the company articles.

        (I think that actual creation of an RTM might terminate the managing agent contract prematurely, but I see no point in doing it just for that.)


        Comment


          #5
          Thank you.

          Re: number of directors. I may be able to persuade some other leaseholders to do this (or not!). Articles of RMC say "number of directors may be any number not exceeding the number of issued shares" ie any number from 1 to 11. So having 1 director seems to be permissible but admittedly not ideal.

          How do I make s/h meeting happen? Do I simply ask the board (ie Mr F) to call one?

          (forgive my very noddy questions - this is all new to me)

          A






          Comment


            #6
            Companies Act 2006 section 303. If they fail to call it, proceed with the following sections.

            You need 28 days notice for any motion to remove an existing director.

            Comment


              #7
              Originally posted by leaseholder64 View Post
              Companies Act 2006 section 303. If they fail to call it, proceed with the following sections.

              You need 28 days notice for any motion to remove an existing director.
              Update...this is all going quite smoothly. We spoke to Mr Freeholder and he immediately offered to step down. Three of the eleven leaseholders (including me) have agreed to become directors. He will then resign as a director and we'll end the maintenance contract ASAP. All agreed in principle, just needs a bit of due process/due diligence to make sure the paperwork is in order, etc.

              Comment

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