Can’t find Directors for our Management company

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    Can’t find Directors for our Management company

    Hi, I am a shareholder and Director of a freehold flat - 1 of 8. There are only two Directors in the management company, myself and 1 other owner. Unfortunately, the other Director is selling her flat and will be resigning as a Director. The management company requires that there be two Directors on the board but I am unable to get any of the other owners to sign up as a Director. I find that I am doing all the work for the management company, e.g., actioning repairs, dealing with tradesmen, paying bills, managing the bank account and filing the accounts, etc, and as you might expect, a bit fed up with it all. My question is, if I resign as a Director of the company also, leaving no Directors, I assume companies house will strike off the company but what will then happen? Will the landlord of the flats then become involved to manage the flats directly? Any tips/advice would be appreciated.

    Yes, if you resign, there will be no directors, no one to do the legal work compulsory for companies house, and probably be struck off as you say.
    If company is struck off, no one can sell their flat, no one can get a mortgage as there is no one maintaining the whole property. The "Crown" who then own the whole property do NOT manage property, - no service charges, no repairs etc.

    But, you say there is a landlord, therefore as he is not managing the property, you must be an R.T.M. ( Right to manage - instead of the landlord. ? ? )
    If you are an R.T.M. then you will be undoing the reasons for taking the management from the landlord and giving it to the leaseholders. ( Landlord not doing a goood job initially )

    As the sole remaining director ( you only need one ) then farm out the managemant to an agent.

    Just confirm there s a landlord - private or commercial firm, and if the leaseholders have shares in the R.T.M. company


      If there must be 2 directors, neither of you may resign until you find replacement directors, otherwise you could be held responsible for failing to carry out your duties. You need to "persuade" others to become directors. I know that it is not easy finding others to volunteer their time. Perhaps you can threaten to appoint all other members as directors if there are no volunteers.


        I'm not sure it's true that I could be held responsible for failing to carry out my duties. The legal position is "a sole director is actually able to resign as a director, leaving the company with all the consequences that might follow, without being in breach of their duties to the company" per companies house. The articles of association of the Management company require that there be 2 Directors. So I can't even farm out the management.


          That is interesting because Companies House used to refuse to accept the resignation from the only remaining director, The Companies House website still states that a director's responsibilities include following the Company's rules set out in its Articles of Association and if a director does not satisfy those responsibilities, he may be fined, prosecuted or disqualified..
          A member of the Company could also take legal action against a director under s178 CA 2006.


            s154 CA 2006 requires a Company to have at least one director and I am very surprised that anyone would advise you that a director may allow the Company to be in breach of the legislation breach of its Articles. Yes, you may be able to inform Companies House that you have resigned and they may now accept the resignation, but that does not mean that it is the end of the matter..


              If a Director resigns, he / she can still be fined for acts done ( or not done ) whilst they were a Director.
              So don't think you are in the clear just by resigning !


                You don't have to do everything yourself. Just sub-contract all your work .

                As director of the management company, you can appoint a managing agent to administer the service charge account on a one year's fixed contract followed if continuation of service , subject to 3 months notice to terminate by either side. Service standard of managing agent to comply to RICS residential Management Code


                  Most likely your M&A will require 2 directors to be quorate so you can't appoint a MA on your own, but the two directors could appoint a managing agent who would probably also fill the vacancy for second director (if they don't have to be a flat owner in M&A) until you can persuade another flat owner to take the role.


                    It is not true that you cannot resign. If your Memorandum and Articles say that you need to be a leaseholder for example and you sell your flat you cannot remain.

                    If you do end up with no director, Companies House will write to all the shareholders or members asking for new directors and outlining the consequences - which can be draconian so not advisable.

                    If two are required, the ONLY action you can take is to appoint another director, you do not have authority to do anything else at all.

                    However, you say you have a third party landlord, in which case it is not so serious. If the company owned the freehold it would mean forfeiture to the Crown and a lengthy and costly process to retrieve it. If the company doesn't own the freehold then a new company would have to be formed but that is much simpler (and you still need one director). Your current Articles would have to be amended after a vote to reflect that only one director is required. I suggest you find someone willing to be a director if in name only or canvas for reduction to one director and concur with the suggestion to appoint an agent.


                      Originally posted by Sarah B View Post
                      If you do end up with no director, Companies House will write to all the shareholders or members asking for new directors and outlining the consequences - which can be draconian so not advisable.

                      If two are required, the ONLY action you can take is to appoint another director, you do not have authority to do anything else at all.
                      Companies House didn't follow this route when our company had no directors, it just began strike off action for the failure of the MA, who was the only Officer left, failing to file the Confirmation Statement!

                      Our company was then saved by leaseholders volunteering to become directors and the MA was replaced, however, the new MA didn't want to manage the develoment in line with the lease or RICS Residential Management Code.

                      Therefore service charge arrears and the balancing charge from the previous year went uncollected.

                      When subsequently challenged over this, along with the apathetic fellow directors, it was me that was forced out due to the MA terminating the contract and the apathetic directors stating I would be left on my own.

                      As you say if the articles require two directors one will find it very difficult to act.


                        I do sympathise with you, it is not uncommon for members of a Company to fail to share the workload. A number of the above comments are partially correct.
                        Directors should not allow their numbers to fall below the minimum required but if you don’t have the minimum, the only action which you are permitted to take is to appoint a director, if the Articles permit directors to make appointments, or call a general meeting of members at which either new directors can be appointed or the Articles can be amended eg to reduce the minimum number of directors or allow non members to become directors.
                        I don’t think that Companies House has the resources any more to check that Companies have the required number of directors and the more likely event is that striking off action will follow either when the Company fails to file the confirmation statement or its annual accounts. Even after being struck off, an application can be made to reinstate the Company to the register otherwise what happens will depend on the terms of the lease, which may state that the freeholder would take over the management.
                        I have known Companies to operate outside their Articles but obviously it is not recommended. Wrongful actions taken by a Company can be ratified after the event.
                        I recommend that you call a meeting of members as soon as possible.


                          Thank you for the reply.

                          Our company has held only 2 AGMs in it's history 2006 to present, one I managed to get called as a leaseholder and the other I instructed the MA, as director, to call in September 2019.

                          Since being forced out the company has failed to hold another, failed to issue service charge accounts (2019) and for this year has failed to issue the budget or the first 6 monthly demand for service charges.

                          Who is responsible? I believe the RMC (directors) are responsible and not the MA who is merely the hired help.


                            I agree that RMCs are not always run properly and often the directors do not understand their roles or responsibilities. We have covered the point about members being able to request meetings or force them if they possess 5% of the voting rights. I agree that obtaining service charge accounts can be more difficult, I have known leaseholders suspend payments until they are provided and even make applications to the FTT to challenge the service charges in order to obtain them...Failing to issue a budget and demands are more unusual as the RMC requires monies to pay bills. I also agree that the RMC and its officers are responsible and not their agent, although some agents do attempt to control the running of an RMC.


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