Sole director fails to call AGM and appoints additional director

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    Sole director fails to call AGM and appoints additional director

    Hi All,

    I am looking for advice or confirmation regarding the legality of a director of an RMC acting solely when the Articles of Association state that the minimum number of directors will be two.

    Until over two years ago the RMC had two directors and no registered company secretary.

    On the change of Managing Agent one director resigned and the MA became the Corporate Secretary, however no AGM was called.

    Over 12 months later AGM held but no appointment of a new director was made. One member failed to be appointed at the AGM but was appointed a week later with the MA stating it was in accordance with the Articles that the director could appoint any member of the company as a director to fill a casual vacancy or as an additional director. The actual wording used in the Articles is the directors not the director.

    Can this sole director act alone or is he required to call an AGM to appoint further directors?

    This year the director that was appointed by the sole director resigned and another director was appointed again by the sole director.

    The Articles also state the months that can elapse between one AGM and the next and this again has been ignored. I believed that additional directors only held office until the next AGM or the date on which it should have been held when they are then eligible for re-election. The Articles state this however with "or the date on which it should have been held" omitted.

    So the question arises can one director continue to act when the company is in conflict with the Articles?

    Company incorporated under 1985 Companies Act Table A and Regulation 64 shall not apply to the company, but there will be no maximum number and a minimum of two directors which can be determined by ordinary resolution of the company. Only the reference to alternate directors has been omitted. All regulations regarding retiring by rotation do not apply. Only members of the RMC can become directors.

    Any advice concerning the above would be gratefully received and I thank you for your time in advance.

    Regards

    #2
    If you are willing to accept the responsibility as director and you qualify , you can ask a couple of leaseholders to propose your name for becoming a director.

    Comment


      #3
      Hi,

      Any registered company is a self-contained, self-controlling legal entity governed by the Companies Act 2006 and its own articles.

      Any managing agency is a contracted agent service defined by specified roles and duties contained in the agent contract.

      Even if the agent contract says things like: "Convene annual meetings or attend board meetings" etc., none of this gives the managing agent CONTROL over the principal entity to the contract. That would be the tail wagging the dog.

      If an agent company offers "Company Secretary services" and puts forward a named officer to be registered as such at Companies House, this role does not:-

      1. Give the agent control over the principal party (RMC).

      2. Give the company secretary any executive powers over the principal party (RMC) ---and there ought to be a contract on what duties the CS undertakes, but if not the default is still not executive power.

      3. Allow any random officer of the agent company to 'run' the principal party (RMC) just because (usually) one of the agent directors is the registered company secretary of the RMC.

      The above offers the first answer...where you refer to the 'MA' stating what was or was not in accordance with the RMC company articles, this had as much legal force as the milkman expressing an opinion.

      MAs have no right to interpret the RMC's articles. From my experience they commonly cannot manage their own RICs code brief, let alone claim to know company law.

      Why do leaseholders put up with this nonsense? (Our RTMCo was faced with similar nonsense and on each occasion I told the agents to back off interpreting our articles for us and making executive decisions and they did because they had to).

      As for your issues, what your directors can or cannot do is enshrined in the CA 2006 and the extant articles (needing a case by case unravelling of where the articles contradict the Act - some older articles are overruled and some are not).

      The real problem here is the apathy of the members of the company in allowing the director to act as you state. You personally could spend good cash getting legal opinion on stuff that is readily available to download and read. But whatever you read, or learn from answers here, you face the same hurdle...you and the members have to act together. It is unlikely you can achieve much yourself unless, as has been said, you line up members to vote you (and at least one other) onto the board to take over.

      Your first task then would be to put the agent back in their legal place focused on cutting the grass and doing repairs etc, not playing-acting at managing somebody else's company. They are not officers and they are not directors of the RMC. They need constant reminding of this. They are merely agents who manage the lease aspect of things - not the landlord company itself, and meanwhile their designated person looks after simple and routine admin stuff for Companies House.


      For what it helps as a benchmark, the Model Articles here...


      https://www.gov.uk/guidance/model-ar...ited-companies


      Companies limited by shares:

      4.—(1) The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action. [...]

      17.—(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director—
      (a) by ordinary resolution, or
      (b) by a decision of the directors. [...]

      18. A person ceases to be a director as soon as—
      (a) that person ceases to be a director by virtue of any provision of the Companies Act 2006 ...[...]


      Notice NO rotation and NO mention of temporary appointment until next AGM (Given no need for AGMs in 2006 Act or post April 2013 Model Articles). Shareholders reserve power to sack directors in the CA 2006.


      Companies limited by guarantee:

      4.—(1) The members may, by special resolution, direct the directors to take, or refrain from taking, specified action. [...]

      (Same as article number 9 in RTM company articles)


      17.—(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director—
      (a) by ordinary resolution, or
      (b) by a decision of the directors. [...]

      (Same as article 22 in RTM Company articles)

      18. A person ceases to be a director as soon as—
      (a) that person ceases to be a director by virtue of any provision of the Companies Act 2006 [...]

      (Same as article 23 in RTM Company articles)

      Notice NO rotation and NO mention of temporary appointment until next AGM (Given no need for AGMs in 2006 Act or post April 2013 Model Articles). Members reserve power to sack directors in the CA 2006.

      If your company is governed by Table A it would be the version in force at time of incorporation. There are somewhat involved (to me anyway) differences as to what the company is free to do where its old Table A articles differ to the CA 2006.

      Ideally, in my opinion, an RMC ought to adopt the new Model Articles to protect the membership completely within the new Act. I would not stray into giving hard and fast layman thoughts as your mileage will therefore vary.

      To cut a long story short, follow Gordon999's advice (but get one more volunteer with you)! Only way to solve things.
      Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

      Comment


        #4
        Thanks to Gordon and especially to MrSoffit again for his detailed reply.

        It is difficult however with the apathy of the other leaseholders that actually live at the development to proceed along the lines of advice given. Why they are happy to allow non residents to continue to run the development is beyond me, considering the level of service received.

        Regards

        Comment


          #5
          Hi all,

          Managing agent who is also Corporate Secretary again registers leaseholder as a director of our RMC without calling an AGM.

          The RMC is limited by shares and incorporated under Companies Act 1985 and Table A shall apply to the company.

          As a member I have been calling for the overdue AGM from 2017 to be held. With the resignation of one director the company was again in conflict with its articles of association but still failed to hold the AGM or call a GM.

          On finding the company again required another leaseholder to volunteer his services I requested that they call a GM and stated that I would be interested in putting my name forward to be a director, however received no reply.

          After again calling for a GM to be called I was informed that another director had already been registered and that the minimum had been met. When asked where the authority was to enable this I was again informed by the MA that it was in the AoA.

          Any advice of where to go regarding this would be much appreciated, this is now the 3rd time the MA acting as Corporate Secretary has registered a director with CH.

          Comment


            #6
            Article 11(3) of the current model articles is clearly intended to give any remaining director(s) the powers you don't want them to have: articles-for-private-companies-limited-by-shares/model-articles-for-private-companies-limited-by-shares#quorum As such, one can see that the legislators intended that the remaining director is allowed to correct a shortfall in directors.

            Article 90 in 1985 table A does the same. Whilst your articles disapply table A, I'd expect them to have a similar provision, although the very minimum power that would need to be reserved to an inquorate board would be the power to call a general meeting to appoint directors.

            Unfortunately company law is set up such that the only completely safe way of getting rid of a director is to get rid of all the directors, or appoint enough new directors, at the same time, to always outnumber them, otherwise directors can, and often will, immediately re-instate directors removed by the members. (The special resolution provisions in the model articles would allow the members to forbid such appointments, with a 75% majority, but the board would have plenty of time to pre-emptively appoint reinforcements.)

            Even if they are in breach of the articles, the only, and probably expensive, way of enforcing the articles would probably be a court injunction.

            Comment


              #7
              Hi leaseholder64,

              Thank you for your reply. Our articles only allow the directors to appoint any member of the company as a director to either fill a casual vacancy or as an additional director. The appointed director only retains his/her office until the next AGM when eligible for re-election. And of course they are failing to hold the AGM. The articles also state the company by ordinary resolution at a General Meeting can appoint any person who is willing to act to be a director to fill a vacancy or as an addition to the existing directors.

              If it was meant to allow a single director to act alone why does it refer as regards the directors to a casual vacancy and with regard to the members to a vacancy?

              Comment


                #8
                I would say you are wasting your time worrying about plural not implying singular.

                The failure to hold an AGM is actionable, because your articles required AGMs (in general AGM's are no longer required), but if the company won't play, you will need to get a court injunction to make them play. I imagine that wont' come cheap. They are not committing any criminal offence.

                The failure to appoint other people of directors would appear to be a failure of the members to require the calling of a general meeting to appoint them. Actually having an AGM won't solve that, as there is no requirement to declare open house for new directors at an AGM.

                Comment


                  #9
                  Hi leaseholder64,

                  I do appreciate your input and it has opened my eyes to the interpretation of Article 90 Table A so I can't see much point challenging the continual appointment of directors without member/shareholder voting in.

                  You say they are not committing any criminal offence however the legal entity to demand the Service Charge is the company, but the company is not being run as a company, i.e. dormant company, members not issued with company accounts & directors report, all costs through Service Charge, no AGM or GM held and to be honest the tail wagging the dog! (I.E. Managing agent running the company!)

                  Comment


                    #10
                    Firstly this sort of hijacking by MAs seems to be common, based on what I've seen on the forum.

                    If there is no ground rent, the company being dormant is probably correct. I think even dormant companies have to give accounts to members, but I'm not sure who would enforce them, and those accounts would be of no use to you.

                    Even for non-dormant small companies, the legal requirements for annual reports are so weak as to be worthless. All you need to know is the names of the directors to prepare a legally valid small company annual report.

                    All the service charge expenditure comes from a trust account, not the company. Whilst there is an open question as to whether money should be shown as temporarily passing through the company, most commonly it is not. Currently you have to make a formal request for the trust accounts (although the RICS guidelines say they should be volunteered). Failing to provide them within the later of six months from the end of the accounting period, or one month from the request is a criminal offence. However, it is enforceable by the local council. and I have never heard of a council actually using that power; like most power to prosecute, it is discretionary, and they would make a loss on a prosecution.

                    Failing to call an AGM is, I believe, just a breach of contract, and would have to be pursued in a civil court. Whilst the vote to re-appoint a director could be lost, the directors could just ree-appoint them until the next AGM, at the next board meeting, and, at least in non-RMCs, this really happens sometimes.

                    The legal remedy for failing to call a member requested EGM is for the members to call it themselves, once the time limit for the company calling it has passed. As such, I don't think there is any offence committed.

                    Comment


                      #11
                      Hi leaseholder64,

                      I may not like all your answers, but will heed your advice, after you have kindly taken the time to reply.

                      Thank you.

                      Comment


                        #12
                        As there is a managing agent involved, and they are presumably operating for profit, ask them for details of their redress scheme, and in default inform the council (probably trading standards), and also ask for their complaint procedure (the redress scheme will insist on one and should take action if they fail to provide details). Then make a formal complaint about their failure to comply with 7.10 of the RICS code of practice (any leaseholder interested in the management, and every director, should have access to this). Or, formally request the summary accounts, and, if not provided within the time limits already mentioned, or if excuses are made, start the formal complaints procedure for criminal breach of section 21 of the Landlord and Tenant Act 1985, and for failing to comply with section 7.12 of the RICS code. Escalate properly, through the complaints procedure, as far as the redress scheme itself, but do not bypass the complaints procedure.

                        Comment

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