Moving to RTM: How do members check the powers of Directors

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    Moving to RTM: How do members check the powers of Directors

    Our building in London (6 units) is finally moving to RTM. Until now, we had a Head-Leaseholder who has been inept and rather dishonest (he gets paid as a % of expenditure). I have managed to keep him in check on many occasions using the test of reasonableness.

    The proposal for the RTM is to have 3 directors (including me) and to employ managing agents.

    However, in the past as a tenant, I have disagreed on many occasions with the other two. My concern is that I would be consistently outvoted. One of the directors wants to embark on a major expenditure trip upgrading the lift and the boilers. I am using the word "upgrading" because the existing lift and boilers are working perfectly well and there is no reason to upgrade them. I think that he is using the RTM now to try and push his grand plans. For example, he is trying to "discourage" two tenants (two elderly people) from becoming members of the RTM.

    How can I keep directors in check? Can the other two directors simply outvote me and "instruct" the managing agents to execute major upgrades, without any consideration to "reasonableness"?

    Any assistance would be much appreciated.

    #2
    The other 2 directors obviously can outvote you. However, their actions are bound by the terms of the lease. If it is repair and maintain there is no authority to charge placeholders for any improvements.
    Who has decided there will be 3 directors ? Why not 5 ? I don't like 3 as the number, makes getting a majority too easy.

    I think it would be useful to have informal discussions with others to find out their views.

    Comment


      #3
      Thank you. It is very helpful to know that they are bound by the terms of the lease. The leases say repair and maintain, until such time that this is no longer feasible (e.g. the lift and boilers are beyond repair).

      With regard to why only 3, 2 others are elderly and not able and the 6th tenant is an off-shore company that is wary of making their voice heard!

      Many thanks.

      Comment


        #4
        INFO 1.
        Directors . . .are you taking your responsibilities seriously?

        Both right to manage (RTM) and Resident’s Management companies are limited liability companies and therefore the directors need to be aware of their duties and liabilities under company law.

        Individuals who are appointed as directors should note that their role is not just for the purpose of forming the RTMCo/RMC but that they are officers on an on-going basis.

        An RTMCo must have Articles of Association (articles) which governs the purpose and running of the company. The articles are prescribed by law and the company won’t be valid unless they are in the correct form; the procedure for appointing and terminating directors will also be in the articles. RMCs can have articles drafted specifically for the company’s requirements.

        Directors have duties under different areas of the law such as health and safety, insurance and employment law. These comprise the following:

        A duty to exercise their powers for their proper purpose

        Always check the company's constitution to ensure that you are always acting within your powers and check if there are any limitations on what a director can or cannot do.

        A duty to promote the success of the company

        This is the primary duty of a director and there are a number of things that should be considered when assessing this duty, for example if a decision will have long term consequences and impact on the community and/or the environment.

        A duty to exercise independent judgment

        It is important that individuals who are directors are not influenced by others and arrive at decisions on their own. For example neighbourly issues are likely to arise from time to time. In these situations directors should ensure that their decisions are not influenced by their personal opinions.

        A duty to exercise reasonable care, skill and diligence

        It is important to make sure that decisions are considered carefully and properly. Where uncertainties arise, seek professional advice.

        A duty to avoid conflicts of interests

        Directors must not put themselves into a situation where their interests conflict with those of the company. The articles of association will detail the procedure dealing with directors’ conflicts of interests. For example, if the RTMCo/RMC is in need of a plumber and a director suggests using his brother’s plumbing company, that director should not participate in the decision-making process.

        A duty not to accept a benefit from a third party

        Directors should carefully consider any offers of company hospitality. For example, if a builder is engaged in exchange for offering his services to a director personally.

        A duty to declare an interest in a proposed transaction or arrangement with the company

        Directors must declare both the nature and extent of their interest to the other directors. This can be done in writing or orally at a board meeting (where it should be recorded in the minutes) before the transaction is entered into. For example, if a director works for a fuel company and the block is looking to change fuel suppliers and considers his company, he or she must let the other directors know and not participate in the decision-making process.

        It is also important to bear in mind that directors cannot avoid their duties by resigning - a director’s duties will still apply in relation to all actions taken while in office. Bearing this in mind, consider recording in writing matters that have been discussed and decisions made, so there is proof that careful consideration has been given to them. There are additional obligations a director must consider. Directors have a duty to keep accounting records (records), file annual accounts (accounts) and annual returns (returns). Company law requires that every company must keep adequate records that show and explain the company’s transactions accurately and be in a position to disclose the financial position of the company at any time. These records must have entries of the day-to-day sums of money received and expended and a record of the assets and liabilities of the company. A company must keep the records at the registered office or a place that the directors think fit and these must be available for inspection at all times. Records must be kept for three years from the date on which they were made. In addition, directors have a duty to prepare accounts for the company for each of its financial years. In the case of an RTMCo/RMC, the accounts will be a balance sheet giving a true and fair view of the state of affairs of the company as at the last day of the financial year. The directors must approve the accounts and these must be signed on behalf of the directors and filed at Companies House (CH). Returns must be filed at CH each year, usually on the anniversary of the company’s incorporation. The annual return must state the date to which it is made up, the address of the company’s registered office, type of company it is and the officers of the company.

        Company law also requires that a company keeps statutory registers (registers) recording the details of the officers and members, and that they should be available for inspection at all times. These registers have to be updated to record events such as appointments and resignations of directors. The contents of the registers and what is showing at CH should be exactly the same. The form AP01 is used to give notice to CH of the appointment of a new director and the form TM01 is used to give notice to CH of the resignation of a director. Failure to prepare and keep records, file accounts and returns and maintain the registers can result in the directors being held liable for penalties, criminal prosecution and possible disqualification. If there is persistent failure to file accounts and annual returns CH may strike the company off the Register of Companies. CH will send several warning letters giving notice of the failure to file these documents. If there is no response from the company, the moment the company is struckoff all the assets of the company will become the property of the Crown and the company will no longer exist. In the case of an RTMCo/RMC, the asset will mean the building of which each member owns a flat.

        If a company is struck-off the directors of the company should seek advice on restoration procedures. These procedures can be costly and time-consuming. There will be professional adviser’s fees as well as Companies House fees and penalties. Whether through the court or administrative restoration procedure, it can take up to six months before the company is restored to the Register of Companies.

        Clearly, the responsibilities and duties of a director of an RTMco/RMC shouldn’t be taken lightly and having good professional advisers on hand when necessary is invaluable. If in any doubt consult them before taking any action on company matters.

        Comment


          #5
          Should be required reading for directors/potential directors and anyone whose Freehold belongs to a Company.

          Comment


            #6
            Thank you Ram and Scott22. The RTM company is adopting model articles which, I am advised by the solicitors, cannot be altered. I am taking my duties seriously however I am concerned that the other 2 are purely viewing their directorships as a position of controlling the decision-making in the building. I take comfort from what you have both said although this would imply that the road ahead will be one of permanent conflict. At least, I have been warned!

            Comment


              #7
              From experience I think you are probably right. I tried to accommodate people but learnt that is a mistake. Keep as much as possible black and white. Do not get drawn into drawn out conflict over things that are either right or wrong. I think that just adds fuel, stick with the regulations, no more no less.
              good luck, hopefully they will sell !

              Comment


                #8
                INFO 2.

                If you are appointing a Managing agent, then THAT agent makes the decisions on maintenance, etc
                and NOT the directors.
                Please point this out to the directors ( After the agent is employed, so directors cant decide not to have an agent once above is known to them )
                Directors only get involved if something serious is amiss at / with the agents.

                I have in the past walked away from properties that have directors that wont let the manager "Manage".

                Had to do this twice.

                1st. one: ( 4 flats ) They are still unable to rectify the faults of the directors, so the others suffer in silence, and refuse to get an F.T.T. manager appointed. - so bye bye. ( If they don't listen, nothing I can do, but walk away )

                2nd one : ( excess of 24 flats - actual number not shown, to protect the member ) )They have reverted back to the conflicts they got me in to resolve which I did resolve, ( Directors resigned on mass, eventually.) I also got a "Fraud investigation crime number but sheep within the building hide behind closed doors, refuse to act on advice, so again, bye bye.

                Even on here there are stories of managing agents stating they can no longer administer the place due to interfering directors.

                To help you know more, look at http://ram2.hostbyet2.com/
                but don't forget, the agent sees to these items.

                R.a.M.


                Comment


                  #9
                  Totally agree. In fact, I made the appointment of a managing agent a necessary condition for my support for the RTM. I view my role as a director as providing oversight and nothing more.

                  Personally, I believe that a managing agent appointed by the FTT (Section 24) is a better solution for our building. But I tried that 4 years ago and sadly the FTT did not make the order as two tenants threatened to stop paying their service charges if the FTT made the order! They reached the conclusion that the appointment of a new manager would make a bad situation worse!

                  I really appreciate your comments.

                  Comment


                    #10
                    Originally posted by aki131960 View Post
                    sadly the FTT did not make the order as two tenants threatened to stop paying their service charges if the FTT made the order!
                    Is this right ? "FTT did not make the order"

                    Because under an F.T.T. manager, the manager just sues tenants for not paying service charges.
                    Just as a freeholder would do.
                    That's why you get an F.T.T. appointed manager ! ! !


                    Comment


                      #11
                      Doesn't it depend on the contract ? Surely giving decision making to a MA take away from director responsibility. I can imagine a lot of blaming would take place. My simple understanding is that directors run things.

                      Comment


                        #12
                        Directors run things.
                        In big business, the directors employ "MANAGERS" to run the day to day things, and on big salaries too.
                        You don't employ a Manager, then question everything he does, or interfere, or countermand every thing he does, as a professional Manager.
                        If the Directors want to run the business, then they sack all the managers, assistant managers, foremen, charge hands etc.

                        What does a RTM or RMC have to do if they have a manager.
                        Answer, = basically nothing, as they have handed over the running of the property and administration to a managing agent -- quite simply.
                        THe directors don't buy and sell anything, don't make any profit, dont have paid employees, company cars, jets, overseas offices etc etc.

                        The following tells you what a managing agent does, as the managing agent WILL become the Company Secretary.
                        And in small businesses, the Co. Sec or underling at the managing agents administer the property, the maintenance, the flat sales, suing leaseholders for not paying service charges.

                        Read following found at my info site ram2.hostbyet2.com/cosecrole.htm

                        Company secretary: role and responsibilities ( Revised 28/11/2017 )
                        Private Companies

                        The role of a company secretary ( Or a Director that does these duties )

                        Board

                        Be available to give detailed practical support and guidance to directors both individually and collectively.
                        Assist in the acquisition of information by all board and committee members.
                        Facilitate record keeping to ensure compliance with the required standards of good governance.
                        Raise matters which may warrant the attention of the board.

                        Company
                        Ensure compliance with all relevant statutory and regulatory requirements and ensure that the specific business interests
                        of the company are taken into account.
                        Help implement corporate strategies by making sure that the board's decisions are properly carried out and communicated.
                        Give guidance and advice within the company on matters of business ethics and good governance.

                        Shareholders
                        Communicate with the shareholders as appropriate and to ensure that due regard is paid to their interests.
                        Act as a primary point of contact for institutional and other shareholders, especially with regard to matters
                        of corporate governance.

                        Responsibilities
                        The range of responsibilities and duties of a company secretary will depend on factors such as the size of the company and its line of business.
                        It is important to note that as an officer of the company, the company secretary may be criminally liable for defaults committed by the company (section 1121(1), 2006 Act).

                        Whilst legislation does not set out specific duties, the following responsibilities are typical of a company secretary:
                        ( Or a Director that does these duties )

                        Organising general meetings and board and board committee meetings.
                        Preparing meeting agendas with the chairman and/or the chief executive and advising management on content and organisationof memoranda or presentations for meetings.
                        Collecting, organising and distributing information, documents or other papers required for meetings.
                        Making sure that all board and other meetings are minuted and that the minute books are maintained with certified copies of the minutes.
                        Keeping copies of all members' resolutions.
                        Making sure that proxy forms are correctly processed and voting is accurately carried out.
                        Providing information and disclosure
                        Providing members and directors with notice of meetings.
                        Ensure the correct procedure for the appointment of directors
                        Providing members with proposed written resolutions and auditors with any passed resolutions.
                        Ensuring that people entitled to do so can inspect company records.
                        Supplying a copy of the accounts to every member of the company, debenture holder and person who is entitled to receive notice of general meetings.
                        Company statutory registers
                        The company secretary will usually be responsible for maintaining the statutory registers and minute books
                        (for both directors and shareholders).

                        The statutory registers are:

                        Register of members (section 113(1), 2006 Act) ;
                        Register of company charges (section 891(1), 2006 Act);
                        Register of directors and secretaries (sections 162(1) and 275(1), 2006 Act);
                        Register of directors’ residential addresses (section 165, 2006 Act);
                        Register of interests in voting shares (substantial holdings and those notified in pursuance of a section 793 notice) (
                        section 808, 2006 Act); and
                        Register of debenture holders (if applicable) (section 743, 2006 Act).
                        These registers may be held at a place located in the same part of the UK as the company's registered office rather
                        than at the registered office itself. If the registers and resolutions are not kept at the registered office of the company,
                        the address at which they are kept must be notified to the Registrar within 14 days (using form AD03).
                        The company secretary will usually be responsible for ensuring that people entitled to do so can inspect company records.

                        Companies House filings
                        The Company Secretary will normally be responsible for ensuring the company files statutory information promptly to
                        Companies House, such as:

                        Copies of resolutions and agreements (sections 29 and 30, 2006 Act).
                        Accounts and reports (sections 441 and 451, 2006 Act).
                        Annual return (on form AR01) (sections 854 and 858, 2006 Act).
                        Notice of changes in accounting reference date (on form AA01)and registered office (on form AD01)
                        (sections 392 and 87, 2006 Act).
                        Notice of appointments or changes in company secretary or directors (on forms AP01 AP02 AP03 or AP04
                        (sections 162(4) and 275(4), 2006 Act).
                        Return of allotment of shares (on form SH01) (section 555, 2006 Act).
                        Particulars of charges and mortgages (section 869, 2006 Act):
                        Form MG01 - particulars of a mortgage or charge.
                        Form MG07 - particulars for the registration of a charge to secure a series of debentures.
                        Form MG06 - particulars of a charge subject to which property has been acquired.

                        Statutory and regulatory compliance
                        The Company Secretary will normally also be expected to assist in:-
                        Implementing procedures to ensure compliance with Companies Acts, such as procedures to help directors
                        discharge their duties in respect of conflict of interests under sections 171 to 177 of the 2006 Act.
                        Making sure that the company is legally compliant in areas such as health and safety and data protection.

                        Administrative duties
                        The company secretary is usually expected to take on extra administrative duties, especially in small businesses.
                        These may include:

                        Authenticating company documentation.
                        Issuing share and loan stock certificates.
                        Oversight of various documentation such as directors' service contracts, property leases, agreements for
                        commercial equipment etc.
                        Administering employee share option schemes.
                        Administering insurance and pensions.
                        Administering PAYE (Pay As You Earn) and payroll.
                        VAT registration.

                        Managing the company's premises and facilities.
                        Custody and use of the company seal.


                        Powers
                        The company secretary has the ability to sign most of the forms that a company needs to submit to the registrar of companies.

                        As the secretary is responsible for the administration of the company and performs the functions of an office manager as well as of a record-keeper, the courts have recognised that an outsider is entitled to rely on a decision taken by the secretary which relates to administration, even if it turns out that the decision was not authorised by the board.



                        Comment


                          #13
                          I was not talking about questioning or countermanding. I am referring to directing based on information and advice from MA. Then the MA implements it, operational level.
                          I would not be happy if an MA actually ran the Company. He or she is paid commensurately
                          Not talking about a big Company.

                          Comment


                            #14
                            Originally posted by scot22 View Post
                            Not talking about a big Company.
                            I know, but the ONLY rules and regulations for leasehold companies, is the Companies Act 2006, which is for big business, which leasehold directors have to abide by, together with Landlord and tenant acts, H+S acts and all else directed at leasehold properties.

                            A managing agent, with the help of the minions in the office, "Manage" the leasehold property, including all that I have mentioned, and more to be found on the internet.

                            The directors still have control, and can sack the agents if they do not perform.

                            The Directors are still in charge, but the functions of maintenance, flat sales, disputes, requests to add windows, doors, he's in my parking space, You need emergency lighting to be fitted, you need a fire and safety report, you need an asbestos report, you need a survey ever 5 to 10 years, etc etc etc, which WILL be done and charged to the leaseholders.
                            All this and more is handled by the agent.

                            So what is left for the directors to do, - - - - - - - Not a lot.
                            The freeholder still has to give authorization for assigning a lease, authorisation for alterations, but as the Company Secretary acts on behalf of "The Company", and has the records of what's been going on at the premises, as disputes, requests etc are handled by the agent
                            The Company Secretary ( at the agents,) is authorised to handle all that.
                            So what is left for the directors to do, - - - - - - - Not a lot.

                            Directors of RTM & RMC - leasehold member run companies don't have acquisitions and mergers to discus, don't have control to double the height of the building and add more flats, don't buy and sell anything. etc etc etc.

                            So what is left for the directors to do, - - - - - - - Not a lot.

                            I have run my own ( small - and one international ) companies single handily, which put me in hospital twice through over work. Currently looking after a few companies / people.( suing one as well )

                            I understand you are saying that directors don't give up their rights to be in charge, and that is correct. To be able to discus needed changes in the lease, if one or all leases are defective. To add "Freeholder" rules and regulations to common parts of the building.etc, etc.


                            But they DO pass over the running of the company to an agent, who is supposed to run the place efficiently ( not always the case though )


                            Comment


                              #15
                              Thanks for taking the time to post such a courteous and detailed response. I will always learn from someone who is more knowledgeable and experienced than me. Best Wishes and thanks again

                              Comment

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