Freehold and election of directors

[England2007]

Dear Landlord Zone,

In short how is directors elected/chosen for directorship in a freehold (we are 108 flats and I think 83 has a share of the freehold).

The previous board of directors was elected at a AGM, the present board was appointed by that out going board (some people moved, others did not want to be directors any longer and so on). In 2013 the old board stopped entirely as described, two persons was chosen (solely by the board, no consultation) as new directors and was the only ones on the board at the then upcoming AGM late 2013. One director has since step down (moved) and the other one continues and has just appointed a new director in second half of 2014 (no consultation). We are now approaching the AGM for 2014 Dealing with the year 2013/2014 (yes, held here in 2015) and I am trying to become a member of the board too. I've asked through out 2014 but has be refused an explanation as to why I can't be a member (I have a share of the freehold). Am I right in saying that after 2010 you can't just employ your friends as fellow directors but that any appointed director has to be elected at the first coming AGM. The person now director appointed in 2013 but not elected at the then first coming AGM 2013/2014 I see as not legally elected (neither was the other director who left) and now that person has appointed a person as fellow director but at this coming AGM there will be no election either (paperwork send out don't ask you to vote for election of this new person).

Am I right, the directors we have had since the first board described here left has not been entitled to work as directors.

Best regards
England 2007

[Tipper]

The Freehold Company's 'Memorandum and Articles' will state how directors are elected and, removed for that matter!
Usually at AGM following being proposed and voted, etc. All directors should be elected, as well as those co-opted, if the M&As allow/require.

Get a few neighbours to propose and second you and then a vote should see you in!

[ram]

So called Directors are not Directors if not voted in at an A.G.M. - Tell them that and you will expect new directors to be put forward, you included if you wish.

Check which Table "A" your M + AoA refer to, and or which Table A is being used.
As Directors either have to resign every year, or 3 years.
If in doubt, just tell them they have to resign every year and nominations and votes start again.
( Let THEM disprove your one year term )

One important point I found out today ,
If the Directors were not voted in, they cannot stand for re-election. It's the law.
Give that info to them, and again, let them disprove it ( I don't have time to teach you the law on directorships today, unfortunately.)

But look up in the Companies Act, found at .
http://ram2.hostbyet2.com/
Click on CompanysAct2006.pdf and see Directors section.

Must rush

[Gordon999]

You should go to Companies House website and try to buy a copy of the company information pack ( it may be possible to download after making payment by credit card ). You can also buy a list of appointments ( names of directors ) for one pound or it may be free.

[England2007]

Dear All,

Thank you for the answers. I have read up on the links but found the ram2 link somewhat difficult to navigate. My immediate thought is if a freehold with shares is just the same as a company with shares. If so, I guess the rules are as in this link http://www.out-law.com/page-8218 and has been in force since February 2010. It says who is on election every 3rd year and who is every 1st year and that you shall be elected at the first coming AGM after you have been appointed. If the articles of association (is that the same as Memorandum and Articles) says something different or none at all is it then just a matter of having it updated to present law (perhaps silly to ask but one never know what kind of exceptions the law gives).

It will be very embarrassing if the present director and the one she has appointed will not be directors after the AGM, because one: present director was not elected at the last AGM which was the first after her appointment, second: the other will not be director because I will not highlight the issue until after this coming AGM.

[England2007]

From the out-law link:

"Company articles will often provide that all new directors have to stand for re-election at the AGM following their appointment, and that is a provision echoed by the Code. Articles will also commonly stipulate that a third of the directors should retire and stand for re-election each year."

If so as that, it seems it's only recommendations? Echoed by the code in my mind only means that that is the "spirit" of the code but it is not the law and we hope you do it like that anyway?

[Gordon999]

Have you looked at the membership rules and election of director rules for your block's freehold company ? . Some blocks in Canary Wharf area have rules where every buyer of a leasehold property is eligible to be a director. Other blocks freehold companies may limit eligible directors to leaseholders only and there is no retirement and re-election..

So its the rules in Articles of Memorandum & Association for your own particular freehold company is what really matters . Go to Companies House website and buy the company info .

[England2007]

ram,

Thank you for the information.

We are following the "table A" COMPANIES (TABLES A TO F) (AMENDMENT) REGULATIONS 1985 AS AMENDED BY- SI 1985/1052

Can you please tell me where to find the bit saying they can't stand for re election if an appointed director is not voted in. (only rotating directors can continue without an election after they have resigned provided that the number of directors is not reduced or you are put on election and lost, any appointed director must stand for election at the following AGM).

Any way the two appointed directors of which one is left was appointed in the Autumn 2013, then the directors appointing them resigned a month later and the two appointed directors carried on alone as sole "directors" until the AGM December 2013. No election took place but any way when the directors who appointed them had stopped months before the AGM so would the appointed, as one stops being appointed if the one appointing you stop being director (unless at the AGM due to rotation you stop as director and are re elected then your appointed director continues but not if you stop being director sometime before the AGM or are not re-elected).

Bottom line is that we had not had any directors since the last one stopped in the Autumn 2013 and the two "directors" has acted like directors without knowing that they were not, not even appointed directors. It of course means that any agreement they have entered into on behalf of the freehold are not valid and it is quite some during a period longer than a year, they have even been to court over some issue...

What a mess

[ram]

Slight change of direction, or should I say, more info on Directors.

If directors are acting as directors, although not voted in by the shareholders, they are still Directors, and acting as directors, and can act as directors.
Can be sued as directors for not carrying out their roles as a director in the interests of the company.

Those not voted in should be de facto directors.
But it seems you are only a de facto director if the directorship has not been notified to Companies house.

E.G. Companies house have no record of a named director acting as a director, therefore be comes a de facto director if not notified to companies house.

Your directors ARE directors, but they should have been voted in, so this has to be rectified. Their decions in future and previously are / will be valid, as someone has to run the place !

Just make sure the directors are nor sued / chastised for not adhearing to the companies act 2006, any table "A" regulations.
This is to protect the current directors even if you dont like them, as any legal action against them by the shareholders will cost the shareholders money, so bet to forget the past and make sure directors are voted in from now on.

Start afresh, demand the directors start afresh.
The they are safe, and you are safe from unwanted costs.


See also the following ........

I can't remember where I saw it, but assure you it said.
Any Director that was not voted in by the members, cannot stand for automatic re-election.
That also means that the current directors ( if duly appointed ) legaly cannot re-elect said director by themselves.
It must be put to the vote of the members ( the shareholders )


Re Hydrodam (Corby) Ltd [1994] BCC 161

Company Casemap
1 Citers

Millett J described a de facto director as: "a person who assumes to act as a director. He is held out as a director by the company, claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could probably be discharged only by a director. It is not sufficient to show that he was concerned in the management of a company's affairs or undertook tasks in relation to its business which can probably be performed by a manager below board level."

Being a "Director"
If initialy a person was deemed a de facto director, if they do nothing, don't help or work to run the company, then they are not a de facto director.


Secretary of State for Trade and Industry -v- Gray and Another
A decision as to the unworthiness of a person to be a company director, relates to his past acts and not to his present behaviour.
Company Directors Disqualification Act 1986 6(1)

______________________________________________

also read http://www.iod.com/guidance/hot-topi...ir-liabilities

and

https://www.shulmans.co.uk/News/de-f...ities-130.aspx

[England2007]

Dear Ram,

This seems a little odd I must say, I understand that yes some one has to run the firm and a de facto director can run a place in accordance to general practices, like making sure people are paid and other day to day business. I can't imagine that you can play director and do as you like?

Anyway these directors are noted in Companies House as being directors of 3rd October 2013 but we are told in the audit report it was the of 18th of September 2013? The two directors who appointed them resigned on the 31st of October 2013 but Companies House says 6th of December 2013.

Table A says:
79 The directors may appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director, provided that the appointment does not cause the number of directors to exceed any number fixed by or in accordance with the articles as the maximum number of directors. A director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the conclusion thereof.

So the directors are not directors as they were not voted in and can't be auto-re-elected because they are not in rotation and obviously has not been previously elected. You say it does not matter anyway for then they are just a de facto director and that is just as good?

My main concern whit this business and the reason I want to know what exactly is going on at the board meetings is that we are paying very high service charges and that the auditor is paid last year £9,000 and this year £11,000 for doing the audit of 109 flats. For the service charge accounts it is about £6,500 of the £11,000. (I understand the auditor gets a pile of receipts and has to build the accounts which is more expensive than just approving accounts that the managing agent has build but any way we are only 109 flats). We discussed that the price must come down last year but this year it has gone up again. My other concern is the upkeep of the gardens which is keep by an unqualified person who since 2009 has been given £12,000 incl. the year 2012 where he was given £15,000 all with out VAT has he is below that threshold. I have looked into both matters and found that the audit should be around £3-4,000 if the accounts are build by the managing agent (hardly £10,000+ if not). The garden could be done for about £10,000 by qualified people who will do more than what is done now and that is VAT included (it's the gardeners next door who has given and offer which I have send to the board). This new director who has now appointed a new director (which will not be voted in at todays AGM, there is not election and an appointed director can't be auto-re-elected) thinks a I the garden looks rubbish and the auditor is to expensive but still does not want me on the board??? I think that the director has taken pity on the guy who does the garden and who has no qualifications out in garden, for what if he don't have a job... also the old lady who brought him here many years ago and who unofficially runs the garden the director has taken pity on, like she's an old lady with one foot in the grave let her do as she likes despite that there are 109 flats and other old ladies who don't have the benefit of controlling the gardener... It's surreal sometimes but it happens that the auditor is also this old ladies friend and she also brought him here but because she is and old lady who go and tell the gardener is educated in Kew gardens (he has no education at all) and the auditor is so, so sweet and they all somehow do more than we can expect.... no one wants to upset her which is quite absurd.

I would like to have a board that consisted of people who expressed and interest in doing so and we took a vote on the matte we could not agree on. After all the idea with the freehold being own by us who live here is that we decide our selves what to do but now we are controlled by some who could as well be the landlord we had before.

best regards
England2007

[leaseholdanswers]

I think you need to simplify it. If the articles only refer to table A then those directors who were appointed by the board as alternates cease to hold office when the appointing directors resigned, they no longer have capacity.

As the AGM is approaching you have two options 1 as one of the 2 man board has to resign, let them do so and be appointed and or stand fro election by yourself, 2 write to all shareholders and table a resolution explaining that as the directors have now left, their appointment ended at that time and a new board, in its entirety, must be appointed.

Getting into arguments about not being eligible for re election is pointless after all they have a flat there and an interest. Let it ride.

[ram]

The shareholders appoint the accountant at an AGM. So exising one can be disposed of until a new one is found

if I divide our accountant fees to get charge per flatt, then x by your 109 flats, that comes to about £ 8500. so get some quotes

[ram]

P.S. from above.

the role of a company director

By LAW this is what a company director MUST do in accordance to the Companies Act 2006


171Duty to act within powers

A director of a company must—
(a)act in accordance with the company's constitution, and
(b)only exercise powers for the purposes for which they are conferred.


172 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of itsmembers as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
(2) Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
(3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

173 Duty to exercise independent judgment
(1) A director of a company must exercise independent judgment.
(2) This duty is not infringed by his acting—
(a) in accordance with an agreement duly entered into by the company that restricts the future exercise of discretion by its directors, or
(b) in a way authorised by the company’s constitution.

174 Duty to exercise reasonable care, skill and diligence
(1) A director of a company must exercise reasonable care, skill and diligence.
(2) This means the care, skill and diligence that would be exercised by a reasonably diligent person with—
(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and (b) the general knowledge, skill and experience that the director has

178 Civil consequences of breach of general duties
(1) The consequences of breach (or threatened breach) of sections 171 to 177 are the same as would apply if the corresponding common law rule or equitable principle applied.
(2) The duties in those sections (with the exception of section 174 (duty to exercise reasonable care, skill and diligence) are, accordingly, enforceable in the same way as any other fiduciary duty owed to a company by its directors.

[England2007]

Yes he is elected every time. Last year we had a discussion about his fees and even the people arguing against him voted for him when we were asked to vote. Only argument was that the board would work to get price down but as it went 10% up it did not work. I did get some quotes for about £4,000 to show it could be done cheaper but nothing happened apparently.

[England2007]

Perhaps I confused it but they where not alternate directors, but appointed directors by the then directors. The appointed directors was the only ones left at the then upcoming AGM. The auto-re-elected themselves but should have been properly elected by notice so people could have done proxies if needed. They could not be re-elected but should both have been elected by a proper election and they were not. So it seems that what needs to be done as there is no elected board by law we must all stand for election and argue why we want to be at the board. There are no fixed number of seats so it would mean that as long as there are seats available any one person can enter the board and you can't be refuses because they don't like you.