AGM cancelled.

[Grumio]

Is this legal?

A bit of background, we currently have three directors, we are allowed to have up to a maximum of eight directors according to the articles of association. We are all leaseholders. Last summer the three directors decided to hire a managing agent who is now in charge of the maintenance. Service charge doubled. Nobody is happy about this obviously. So a few of us decided to become directors as there is room for five more to join the residence Association. The plan is to take over the managing of the block again ourselves. And to reduce the service charge accordingly.

Anyway long story short, 2 out of the three directors decided to cancel the AGM, no reason given for cancelling, the third director says he doesn’t mind either way and is happy to go ahead with the AGM. The only thing is, he is not sure if he can do this by himself. 90% of the shareholders have agreed to turn up to vote for us as they also would like to see the service charge reduced back to what it was.

The situation now is we have two directors who just happen to be good friends of the managing agent, (we only learned of this after the managing agent was appointed) and they are now deliberately obstructing the whole process in order to keep their friend in work.

I am not a legal expert but it seems to me this whole thing stinks. We have two directors that do not live on site who are acting in their own interests rather than acting in the interests of the residents which is what they’re supposed to do.

Any advice on how to proceed welcome, thank you.

PS we have been told that a residents association cannot legally prevent leaseholders from becoming directors should they wish to do so.

[Andrea Cunningham]

Call an EGM. Make sure you give proper notice and that it is legal (download a boilerplate notice off the internet). In that EGM you can vote new directors in, or even vote the old directors out.

[fos333]

Is this a Residence Association or Residents Management Company?

Had invitations to the AGM been sent out to all members? If invitations had been issued then no the AGM should not have been cancelled.

If the 2 directors are "good friends of the managing agent" they should have abstained from any vote to appoint them.

[eagle2]

Yes, I am confused too. If there is a Residents Association, it is required to comply with its constitution.

There seems to be a Company involved as well. Whether or not it is required to hold an AGM depends on its Articles, AGMs can be cancelled for various reasons, lockdowns are an example, invalid notices of the meeting are another example. I suggest that you enquire if another one is to be arranged. If not, members jointly holding 5% or more of the voting rights may request a meeting under s303 Companies Act 2006. Be careful to include on any proposed agenda only company matters such as appointing and removing directors. Reducing service charges is not stictly a matter for an AGM or EGM.

[Grumio]

Is this a Residence Association or Residents Management Company?

Had invitations to the AGM been sent out to all members? If invitations had been issued then no the AGM should not have been cancelled.

If the 2 directors are "good friends of the managing agent" they should have abstained from any vote to appoint them.

It is both a managing agent and a residence Association. But we want to go back to managing the block ourselves.

Thanks for the reply, yes invitations have been sent to all our members. And I agree, they should not cancel the AGM, especially when they haven’t got a plausible reason to do this. Stalling tactics hoping we will go away and forget about it.


As for being in cahoots with the managing agent, that’s another issue that will need addressing in due course. There is nothing in the articles to say they can’t be friends with the managing agent.

We have decided to go ahead anyway, we can’t allow two people to dictate to majority, they are supposed to represent the residents, not themselves.

[eagle2]

Any meeting which you decide to hold will be an informal meeting only, you do need to follow the correct procedure if you wish to hold a valid meeting,

The Articles should state whether or not directors need to declare conflicts of interest and whether or not they are entitled to vote on matters where they have a conflict of interest, It is good practice for them to declare all conflicts of interest and they should abstain when there is a vote regarding the managing agent if there is some connection. Being "good friends" is too vague to be regarded as a conflict of interest, there would need to be some benefit involved.

[Grumio]

The articles state they must declare any kind of interest directly or indirectly, problem is it’s kind of hard to deal with people who keep messing everyone around, calling an AGM and then cancelling it for eg. We have called meetings with them in the past and they don’t turn up. How can you deal with people like that when they don’t follow any rules.

[eagle2]

If you can talk to them or have an informal meeting with them and agree how to proceed that may help, but if they will not cooperate at all, your best solution is to follow the s303 route. They must then arrange a meeting otherwise you are entitled to arrange one yourselves.

[fos333]

If invitations were sent out then it can't be cancelled, it can be adjourned, postponed, however, if the other director is willing to go ahead with the meeting it will be a valid meeting as long as it's quorate. I don't agree with eagle2 that it will only be seen as an informal meeting, all directors do not need to attend a meeting of the members/shareholders and invitations have been sent.

Who issued the invitations to all the members?

[Grumio]

If invitations were sent out then it can't be cancelled, it can be adjourned.


Who issued the invitations to all the members?

Thanks for the reply,

The directors issued the invitations. The AGM wasn’t adjourned or postponed, it was cancelled. Fortunately one of the directors is more than happy to go ahead with the process even if the other two don’t want to get involved.

[Grumio]

If you can talk to them or have an informal meeting with them and agree how to proceed that may help, but if they will not cooperate at all, your best solution is to follow the s303 route. They must then arrange a meeting otherwise you are entitled to arrange one yourselves.

One of the directors is cooperating, but we’re not sure if that’s enough. He’s going to register us at companies house regardless of what the other 2 say. His view on the situation is, leaseholders are entitled to be directors, there is nothing in the articles that state directors must be approved by existing directors.

[fos333]

Good on the director that wishes to proceed with the AGM.

It's not leaseholders that are entitled to be directors, but members/shareholders who are voted in by other members/shareholders who want them to act for the benefit of all members/shareholders.

If he has access to Companies House to register those voted in by the other members/shareholders then all the better.

The 2 directors that do not wish to attend the AGM presumably only hold 2 votes and should not be in a position to dispute those voted in. Ensure the meeting is correctly minuted.

I am assuming that the names of those wishing to become directors was forwarded to the company and resolutions proposing they become directors was included in the AGM invitation?

[eagle2]

Directors can cancel a meeting, I have no doubt that they would find a “reason” and state that their intention is to reschedule the meeting.
If members have been informed that the meeting has been cancelled, another valid meeting can only be arranged by issuing a fresh notice to members.

It follows that any meeting which takes place on the original date must now be informal. You have the further difficulty of having no agenda to follow, any agenda was cancelled with the meeting.

There is a proper procedure to appoint and remove directors and it should be followed.

The 3^rd director who seems to be assisting you needs to be very careful. He appears to be acting without the authority of the board of directors and it is a criminal offence to file incorrect information at Companies House. He may not be able to file information anyway, it is usually filed electronically and an access code is required, which I suspect will not be released.

Does the 3^rd director have any access to the service charge monies and how much is held? Control over and the level of available funds is often the key to disputes such as these.

Moving forward, I suggest that you try to reach agreement with the 2 directors, the 3^rd director could play a major part. If you can demonstrate support from other members, it may help. Alternatively, you may suggest some form of mediation, otherwise you should follow s303.

[Grumio]

fos333,

Thank you for the reply, we are all shareholders/leaseholders and have one share each.

No election process involving all the shareholders has ever been used to appoint directors. The only requirement is that you are a shareholder/leaseholder. They have no legal right to object to leaseholders becoming directors.

Maybe in the beginning there was a formal process to hand over from the company who built the flats to the newly formed residents association who wanted to manage the property themselves. Since then directors have come and gone, and when the numbers got low, the remaining directors try to get more people to sign up to keep the place going. So no formal election process has ever been used to appoint directors to the residents association, not in recent years anyway. We more or less rely on volunteers.

Yes we would like to reach an agreement with the 2 directors who are objecting. We understand they are only doing this to keep the friend managing the property. It is impossible to reach an agreement with people who refused to meet to discuss the matter, they’ve even cancelled the AGM to avoid meeting us. They are determined not to have anything to do with the process.

[Grumio]

eagle2,

Thank you for the reply, yes that’s the other thing, they have cancelled the meeting without informing the director who is on our side, he says that they haven’t followed the correct process to cancel the meeting. They should’ve called a meeting of directors to discuss the matter first. But it probably wouldn’t have made any difference as he would’ve been outvoted 2-to-1.
We have the agenda anyway if we need to proceed and we can even add to it as long as we notify everyone of any changes we make to it.

There isn’t a procedure for appointing directors to our residence association other than asking people to join. I think the process for removing directors requires 75% of the leaseholders to vote a director off.

I can’t see the director who is helping us being charged with a criminal offence when the people, that is the other two directors are refusing to engage in the process, all he is doing is appointing people who want to be directors as he has done in the past.

The managing agent is in charge of collecting the service charge, all payments go to him. No directors have access to the service charge money. I am not sure if he has an access code for companies house but I will ask him the next time I see him.

It is difficult to engage with people who are avoiding us, I would’ve thought what they’re doing is illegal rather than what the guy who is helping us is doing. He wants to sign us up as directors which we are entitled to be as shareholders/leaseholders, we are legally entitled to be directors.

The only reason they have for stopping us from becoming directors is to keep the managing agent in charge of maintenance, which is about as dodgy as it gets if you ask me. To use legal means for dubious purposes must be illegal in itself I would say.