private limited company - long leases - directors leaving

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    private limited company - long leases - directors leaving

    Hello . we bought the freehold of our properties under the 1993 legislation and subsequently increased our leases to 999 years. The vehicle for doing this was a private limited company in which all long leaseholders have a share.

    At the time of incorporation we tried to make it clear that all shareholders were to have some involvement with the company, and help to some degree with the running. We have managed to keep the communal cost of living in the properties to £100 per annum each , which principally goes on preparation of statutory returns,. as well as some communal interests such as shared window/gutter cleaning charges.

    the same 3 or so people have largely over the years acted as company secretary, lead director, and other directors etc. and have dealt with issues like proof of buildings insurance, collection of monies due, banking, general; dos and donts. etc, as well as being a contact point for any issues.

    with the passage of time however, all of us are getting older, and some are moving on, which has created a succession problem as it seems that people now buying one of the 16 properties have very limited interest in how the company is run, to the extent that extracting £100 per year can be a difficult operation, and attendance at company meetings is minimal.

    We therefore have to consider ways of either engaging shareholders/leaseholders to be more engaged, or employing an outside agent to arrange meetings, issue invoices etc etc as well as being a focal point for any issues that arise.

    does anyone else have any experience of this dilemma please !!

    #2
    Not the same but fully aware of these situations. I think you have to be firm. All directors should set a date when they will resign an bloc.
    An EGM should be called with the reality made clear. It needs tackling head on.
    Don't allow it to drift.

    I have a saying that if everyone did a little no-one would have to do a lot.

    Comment


      #3
      £100 a year doesn't even include enough for insurance! I'm worried that you are failing to spend on necessary things.

      Unfortunately a lack of communal responsibility is common these days even for owner occupiers, who will claim all their time is spent on family and day job, but even more for absentee landlords. There is no easy answer.

      Comment


        #4
        You do not say how many directors are currently in place and if they intend or need to resign?

        Presumably the company has a client trust account for the money collected? As it holds the freehold, did the company retain ground rent income in those excellent 999 year leases? How much money does the company have in its own bank account?

        Engaging a managing agent for 16 flats will create a likely agent fee of around £300 pa per flat maybe more. That's before block insurances and so forth. They can be a right pain to control too. If your Board is weak as 'Principal' party the agent may run amok.

        Meanwhile an agent can't help if all the directors resign. I pretend no direct experience of what happens when all the directors resign, but I hear Companies House gets rather upset. As your company holds a freehold, if it is dissolved the Crown will have it but not act as freeholder or insure the building or manage it I believe. Google Bona Vacantia. You won't be tripping over corgies but it sounds a bad deal all round. With the freehold company dead the tenants can buy back the freehold and need another company to do this, so will need directors....

        Not sure how having the Crown as your dead freeholder helps with selling a lease but I am sure somebody has experience.

        Also, not sure if the last directors standing can just resign and not dissolve the company, but I suppose it is possible. Seems somewhat windswept given the freehold, any creditors and trust funds held.

        Your company may need legal advice before acting.

        I would use a company letterhead and issue a formal calling notice to an EGM giving the required notice period with one agenda item. Proxy votes would not apply in this situation as you need them present to receive information.

        I would attach a Directors Report to the calling notice summarising your research into the various consequences if the company has to be dissolved, including that Bona Vacantia malarkey. Might help focus the minds.

        No law can help them what refuse to follow it, mind.
        Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

        Comment


          #5
          Originally posted by MrSoffit View Post
          I would use a company letterhead and issue a formal calling notice to an EGM giving the required notice period with one agenda item. Proxy votes would not apply in this situation as you need them present to receive information.
          The right to vote by proxy is an absolute right, and a company and its officers issuing a calling notice for a general meeting that does not explain that right commit a criminal offence: http://www.legislation.gov.uk/ukpga/2006/46/section/325

          Comment


            #6
            I stand ashamed and chastised and reminded why I stopped offering advice here.

            When I said 'proxy votes would not apply in this situation' I was short handing for obvious practicalities, not that proxy voting rights would not be prominently advised as required in the calling notice, or that a proxy couldn't pop along to be consulted.

            Let me explain.

            Our company always issues proxy voting forms with calling notices and draws attention to same in the calling notice. IT is as said an offence not to do this. The Board goes further and provides resolutions in the calling notice, with advice that members can submit their own. The latter has a catch 22 because member resolutions can't be recirculated before the meeting.

            Providing resolutions with the calling notice helps members who cannot attend to be reassured the quorum at the meeting (a small number to be fair) isn't going to vote by hand to incur costs that the non-attending member knew nothing about.

            It happens.

            Many members neither attend or return their proxies, but that is their right.

            The problem for the OP is that in this case the suggested EGM is to consult on an existential threat to the company. This does't lend itself to an advance resolution as far as I can see or to a formal resolution voted at the meeting.

            So the proxy attending is there to listen, not vote. That is all I meant when I said "proxy voting".

            What would the quorum vote on? To insist other members become directors? If the purpose of the meeting is to engage in voluntary liquidation proceedings, that would need to be stated as the purpose of the meeting in the calling notice.

            Practice is more interesting than theory in my experience.



            Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

            Comment


              #7
              Yeah thanks to everyone for their replies. It's a tricky one isn't it. To reply to some of the comments. As a matter of historical record there are a total of 16 maisonettes in 4 blocks.

              Historically building insurance is the responsibility of each leaseholder which seems ridiculous but this was the case even before enfranchisement. We did have a serious look at communal buildings insurance years back, bit for various reasons it wasn't a go-er.

              We abolished ground rents upon enfranchisement and sought to minimise costs. Which we have done. We have managed to devise policies for things like GPDR as well as deal with property sales and the associated paperwork with shares and companies house.

              i suppose the directors and company secretary are victims of their own diligence and competence !

              I agree we cannot let it drift. One option could be to sell the freehold as an investment which would produce a windfall for shareholders in the short term but in the longer term would be detrimental. ??


              Comment


                #8
                An investor gaining control of the freehold is the scare story you use to get people to take an interest, not an option that you explicitly seek. With no ground rent the only way they would get any return is by ripping you off for consents and late payment charges. In any case, freehold investors generally don't like getting involved in actual management of the property.

                With such a low spend, there is a good chance a lot of remedial work is needed.

                Comment


                  #9
                  Originally posted by iggypop37 View Post
                  One option could be to sell the freehold as an investment which would produce a windfall for shareholders in the short term but in the longer term would be detrimental. ??
                  I would say that you are severely over-estimating the value of your freehold!

                  I can't see anyone wanting to buy the freehold at any price, or even take it off your hands for nothing, unless their intention is to find ways to rip off the leaseholders.
                  The value in a freehold comes from a combination of the value of the ground rent that can be collected, and the premiums that can be obtained when leaseholders want to extend their leases. In your case you effectively removed all of that value when you removed the ground rent and gave yourselves such long leases.

                  Now the only value in your freehold is anything that the leases might allow to be made from charges for permissions (e.g. permission to alter properties or permission to sublet) and anything that can be added to services charges.
                  At the very least you would expect to pay somewhere in the region of £250 per year per flat for a managing agent before they even start to add on other charges.

                  Comment


                    #10
                    Get 2 quotes from outside agents and call a meeting to discuss which agent's quotation is acceptable to the majority of residents .

                    Comment


                      #11
                      Originally posted by Gordon999 View Post
                      Get 2 quotes from outside agents and call a meeting to discuss which agent's quotation is acceptable to the majority of residents .
                      Appointing a managing agent to manage the properties might be a solution if there really is no one who is willing to give up sufficient time as a director (or share the tasks necessary), but you will all have to accept that you will then be paying a fair bit more than you have been. Directors will still be needed though, in order to agree when work needs to be done and to keep an eye on the managing agents.

                      You would need to make sure that the managing agents you chose are both honest and competent (and, in my experience, most aren't) so it's not just a case of finding a price that sounds reasonable.

                      Comment


                        #12
                        It is not unusual for duties to be carried out by a few volunteers nor that it can be difficult to replace those individuals, You can only call a general meeting and ask for more volunteers,

                        I doubt that a managing agent would wish to become involved if the outgoings are so low.

                        I recommend that you take another look at the insurance arrangements, who is responsible if there is a claim for the communal areas? eg the roof

                        Comment


                          #13
                          just to update everyone, the key issue is what we have defined as the company secretary role where the (private) address is the same as the companies and we keep all the company records that we need to. the major duties revolve around dealing with involved parties when a flat changes hands (vendors, solicitors, buyers etc). Quite rightly the incumbent who has been doing it since inception no longer whats the aggro of this.

                          I am writing to everyone saying that annual charges may well increase by a factor of 5.

                          I think the answer is to offer the role out, with initial support from current incumbents, as an honorarium, but I understand there may be legal implications with this ?

                          can anyone advise ?

                          Comment


                            #14
                            for example, do we need employment policies, transparent recruitment procedures yadda yadda

                            Comment


                              #15
                              If you pay directors, you will have to operate PAYE. In any case it is generally expected that people volunteer.

                              I suspect you will also find that the lease only allows you to pay a managing agent, in which case, you may have to set up a separate company and register with a redress scheme.

                              Comment

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