Forfeiture

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    Forfeiture

    The RMC is ordered to pay a bill which is not a lease expense, details irrelevant. It makes a call on shareholders for money to pay this.

    If a shareholder declines to pay does it put him/her in breach of lease ? Or is it purely Company law ? Possible liquidation and loss of freedom for the Company which I assume would have equal effect on shareholders.

    #2
    If the lease says - ( regarding forfeiture ) that "The leaseholder being charged under section 146 will be resonsible to pay all legal costs and costs in preparation of said intent to forfeit, then the offending leaseholder pays ALL legal costs.

    But, if you dont have that in your lease, someone has to pay it.

    The freeholder is the one that brings the action, therefore it's the directors that have to pay.
    But also, the freeholder may ask for the shareholders to contribute, as they too are - sort of - the company..

    If the freeholder has no excess money in the bank fom the leaseholder / shareholders, then the Freeholder may go bankrupt, thereby the freehold reverts to the crown, and no one will be able to buy or sell a flat, as there is no freeholder to contact.
    The "Crown" holds the freehold until it is bought by someone, they do NOT run the place for you.

    Clause that says offending lwasholder pays all costs, then leaseholder ( 1 ) pays the freeholders bills of gets taken to court.

    No clause in the lease then it is in the shareholders interests to contribute.

    Sorry no positive answer, but i assume shareholders can refuse to contribute.

    Comment


      #3
      Shareholders in the RMC can refuse to pay if the expenses is not allowed under the service charge. This may result in the RMC going into liquidation.

      The leaseholders should form a RTM company to replace the RMC and take over the management of the service charge account and building.

      Comment


        #4
        Originally posted by Gordon999 View Post
        The leaseholders should form a RTM company to replace the RMC and take over the management of the service charge account and building
        This still wont stop court action for an unpaid solicitors bill way before the formalities of an RTM are finalised.



        Comment


          #5
          Would it not be in the interest of one or more of the shareholders to put the money up in return for a yearly interest payment paid out of the management fee the company charges the residents

          the danger here is that bickering and squabbling will cause the whole management structure to fail and you appear to have gone through a process and need to move on

          as a general observation to apply to those thinking of forming a resident management company (not RTM as they have no share capital ) shares should be issued at say £1000 each with £1 paid so that the company can in the future call up the unpaid share capital if push came to shove

          Comment


            #6
            Thanks for all the prompt and helpful posts. I think issuing shares at £1000 and paying initial pound an excellent idea.

            Comment


              #7
              Originally posted by sgclacy View Post
              Would it not be in the interest of one or more of the shareholders to put the money up in return for a yearly interest payment paid out of the management fee the company charges the residents
              The management fee is to pay for the management ! ! ! and not the stock market ! ! !

              Leasehold freeholders don't buy anything or sell anything. They run the place with the shareholders money, not the freeholders money.
              If you don't buy and sell, you don't make a profit. No profit = no dividends.

              A profit is not made by the freeholder, and if it is recorded as such, it's the EXCESS funds in each shareholders account that either gets returned to them at the end of the year, or put towards the next financial years expenditure.

              shares should be issued at say £1000 each with £1 paid so that the company can in the future call up the unpaid share capital if push came to shove.
              You cannot issue a £ 1000 share, with a share certificate to prove you have a share, unless you pay in full, the price of the share certificate.

              If leaseholders wish to partake in getting the freehold back, then they are offered to each to pay equal amounts which is all costs divided by the number of leaseholders participating.

              Dont go messing up the system and Companies act. You will find that a share issued for payment of one pound is worth only one pound.
              You want a £ 1000 share, then you pay £ 1000 and share is recorded and valued at £ 1000.


              Comment


                #8
                I think the details are somewhat relevant. If for example it is a fine by Companies House due to late filing, then the Directors pay out of their own pockets. Does the RMC have any of its own income (ground rent or fees for example).

                But in essence this is a major flaw in the whole idea of lessee owned companies managing a freehold, which is not always the glorious experience it is made out to be.

                But per the original post -- they are asking for money from shareholders, NOT lessees. And if shareholders do not pay up, they have to be aware that their Company will go bust. The Directors could alternatively arrange to sell something to clear the debt (they could sell a bit of land, they could sell the right to a third party to park on the drive or to hold a wedding in the garden -- if any of these are permitted by the lease/arrangement.

                If (for example) one sharerholder fails to pay, the remainder majority could let the Company go bust, and repurchase the freehold from the crown excluding the non-payee who would simply lose their share. Problem solved - albeit at a significant cost.

                Why is there this cost - the solution might involving shareholder suing the company Directors (which is why you don't want to be a Director if you have no meaningful say).

                Comment


                  #9
                  Thanks Andrew for a detailed and helpful post. Unfortunately not giving more details to avoid identifying the situation.

                  Comment


                    #10
                    Much appreciated ram. I had thought it a good idea. However, I value forums especially when you ( me )learn something.

                    Comment


                      #11
                      Another thought. If a director resigned before any possible court action could they still be sued when no longer a director ?

                      Comment


                        #12
                        Originally posted by scot22 View Post
                        Another thought. If a director resigned before any possible court action could they still be sued when no longer a director ?
                        I'd have thought so (at least in principle) if they can't demonstrate that they had nothing to do with a bad deed and opposed it.

                        Comment


                          #13
                          Thanks again

                          Comment


                            #14
                            Originally posted by scot22 View Post
                            Asked If a director resigned before any possible court action could they still be sued when no longer a director ?
                            According to legal views on the internet I have read, a Director can be sued for decisions they made, while a director, if found to be aginst the companies Act, the lease etc, and CAN be taken to court

                            also, if a company falls foul of the law, the company is the directors, so in effect all directors can be sued.

                            If a directors do something wrong and the other directors did nothing about it, all the directors are guilty of an unlawful act.

                            The same applies to no longer being a director when a court case comes up.


                            Comment


                              #15
                              Originally posted by ram View Post

                              According to legal views on the internet I have read, a Director can be sued for decisions they made, while a director, if found to be aginst the companies Act, the lease etc, and CAN be taken to court

                              also, if a company falls foul of the law, the company is the directors, so in effect all directors can be sued.

                              If a directors do something wrong and the other directors did nothing about it, all the directors are guilty of an unlawful act.

                              The same applies to no longer being a director when a court case comes up.

                              Having said all of that almost the entire purpose of the Company/Corporation in history is to absolve and insulate individual humans of responsibility for their actions (murders, negligent deaths, thefts, failure to pay Creditors).

                              Comment

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