Voting Rights and Required Percentages

[Arizona]

Good Morning. I'm brand new to this site so I apologise if this question is in the wrong section.

My wife and I live in a self contained apartment in a converted old house. There are five apartments in total, occupied by five separate couples. We are all leaseholders and we collectively, by five equal shares, own the company that owns the freehold of the building and grounds. We are effectively our own landlords. We have two directors both of whom are company members.

None of us are sure what voting percentages are require for various subjects. Neither our Memorandum of Association nor our Articles of Association give any guidance on the matter but a paragraph in our individual leases says that 'improvements' for the benefit of all shall be approved by at least three quarters of the shareholders.

'The word 'improvements' is a bit vague. Does it cover everything or simply things like communal area decorating and/or communal garden makeovers etc? Could it include improvements in the way that the company itself is run?

We've all tried to find definitive answers on Google but that can be a nightmare of ambiguity when mentions of 'a simple majority, or 60% or 66% or 75%' are made with no explanation of what aspects they refer to.

Any thoughts would be appreciated.

[ash72]

Without seeing all paper work it would be incorrect to categorically state anything, the best thing is to speak with the conveyancing solicitor (either the one you instructed at the time of purchase) or a new one to go through all the documents to clarify the details, some leases will have detailed information others are very vague. You may want to bring this up at the next meeting with the management company.

[Arizona]

Thank you for your swift response.

All five leaseholders have been in residence here for 20 years. We own our own management company and have managed very well up to now because so far we've all agreed on everything. It's just that we would like an idea of the percentages just-in-case, one day there is a difference of opinion.

But thanks anyway, maybe going down the solicitor route will have to be the way ahead.

[Andrea Cunningham]

Is it 3/4 of shareholders, or 3/4 of a quorate meeting? Could be 4 people needed in the former case, but possibly only 3 in the latter.

Likeliest is that most decisions are made by a majority of votes at a quorate meeting - if there is a 50/50 impasse then the chair has a right to a casting vote normally. In practice that could lead to an irrevocable breakdown.

'Improvements' are always going to have grey areas. Some things are obviously day to day, others are definitely improvements, and then there are the indefinable grey areas in the middle. The test in English law is reasonableness - Would the average Jo/Joe walking down the street agree of not?

[Macromia]

Thank you for your swift response.

All five leaseholders have been in residence here for 20 years. We own our own management company and have managed very well up to now because so far we've all agreed on everything. It's just that we would like an idea of the percentages just-in-case, one day there is a difference of opinion.

But thanks anyway, maybe going down the solicitor route will have to be the way ahead.

If you all get along and have so far managed to agree on everything, this may work in your favour.
With unanimous agreement of all shareholders you can agree to have new articles of association drawn up that clearly state how anything is to be decided.
Whatever you decide, you should ensure that the terms of the lease are protected. If the lease has an absolute prohibition against something, I would suggest that nothing short of unanimous agreement should be sufficient for it to even be considered.

[eagle2]

The Articles of the Company will explain how meetings of members are to be conducted. If you let us know which set of model articles apply and any exclusions, we shall be able to assist further. They probably say that each member has one vote, you need 2 members for a quorum to exist and decisions are made by a simple majority, with the chair of the meeting having the casting vote. The only exception would be for special resolutions eg changing the Articles, which require 75% of the members to vote in favour of the amendments.

Please let us know the exact wording of the lease, it should contain a definition of “improvements”. Maintaining the building in its original condition would not be considered to be an improvement, there must be some alteration involved. The lease would not normally deal with the running of the Company, that is a matter for the Articles.

You are quite right to consider the terms of the Articles and the lease whilst you are all in agreement, it is much easier if you wish to make amendments.