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Residents management company - Directors restricted to company members

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AF62
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Residents management company - Directors restricted to company members

#133902

Postby AF62 » April 22nd, 2018, 1:16 pm

Situation involves a management company of a development which is being handed over to the residents.

The management company exists as a limited company and as part of the transfer each leaseholder is receiving one share in the company (one per flat) and nominations are being sought from residents to take over as directors from the developers.

The Articles of Association of the company specify that other than the first directors, "no person who is not a member of the Company is eligible to hold office as a director".

One of the leases is owned by a "family company" (no more details at the moment) and occupied by a family member. That resident wishes to become a director.

On first thought this would seem to be a problem as they are not a member of the company as they do not personally own the share. Their "family company" will receive the share so will be the member as a legal person.

It would therefore appear the resident cannot be a director, but theoretically the "family company" could be a director. However from some quick reading corporate directorships are seen as undesirable so the government seems to be planning to legislate against them other than in specific circumstances.

Residential leases owned by a corprorate entity wouldn't seem to be an unusual situation, so what have I missed or overlooked?

richlist
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Re: Residents management company - Directors restricted to company members

#133908

Postby richlist » April 22nd, 2018, 1:43 pm

I own property on a development that currently operates in the same way as you describe. Each leasehold owns x1_share (,there are 96 properties) and the 'management' of the development is carried out by a number of leaseholders appointed as directors of the Limited Company. The leaseholders put themselves forward at the AGM and a vote is taken. I am a director and we also employ chartered surveyors for their expertise, solicitors and accountants.

If one of more of the properties was owned by another Ltd Company, I can't see any problem with the day to day management. They would still be represented by one person at meetings and still have one vote. We don't have any of our properties owned by a Ltd Company but it wouldn't appear to be an issue.

JonE
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Re: Residents management company - Directors restricted to company members

#133932

Postby JonE » April 22nd, 2018, 4:52 pm

AF62 wrote:It would therefore appear the resident cannot be a director, but theoretically the "family company" could be a director. However from some quick reading corporate directorships are seen as undesirable so the government seems to be planning to legislate against them other than in specific circumstances.


A little light reading gives me the impression that the idea of banning corporate directorships has stalled - or possibly been abandoned (for the time being, at any rate). Companies House still provides form AP02 for appointment of a corporate director.

I'd imagine that formulating such a ban is a bit of a quagmire when attempting to get objectives properly and sensibly balanced. Anyway, there are more straightforward and effective ways to increase transparency but government seems to lack enthusiasm for even such low-hanging fruit so who knows what direction things will take regarding corporate directorships?

Someone could presumably float the notion to the resident who wishes to "become a director" that proposals and consultation on the topic have taken place and any relevant legislation that does arise in this area may force the company to get rid of corporate directors so it wouldn't make sense to appoint one now given that there has been a signpost to that happening at some time. His or her reaction could be instructive.

Bear in mind that the corporate director could present someone other than the current resident/occupier as its representative and that has the potential to get tricky. Similarly, for SDLT or CG purposes the company owning the leasehold could be fully or partly sold (rather than its lease being assigned to a new owner) and you could have a complete stranger representing the company on your board who may not even be resident (unless the company chose to resign its directorship or was in other way removed from your board). Selling the 'family company' (rather than the company assigning the lease) would also side-step any consents or licence fees the leases may require leaseholders to get-from/pay-to the free-holder/ManCo.

I guess much depends on whether there is a sufficient number of natural persons who are prepared to put in the effort as directors but members of the company should be aware that in voting for the corporate director they are not, in fact, voting for the individual who they know as a fellow-resident.

Cheers!

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Re: Residents management company - Directors restricted to company members

#133946

Postby Alaric » April 22nd, 2018, 6:14 pm

AF62 wrote:The Articles of Association of the company specify that other than the first directors, "no person who is not a member of the Company is eligible to hold office as a director".


Can you get the Articles loosened to allow a resident to become a member of the Company.? Probably they could be made non-voting. That's to cover the position where the resident is a tenant or handle the situation with the Company owned flat.

dionaeamuscipula
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Re: Residents management company - Directors restricted to company members

#133998

Postby dionaeamuscipula » April 22nd, 2018, 11:05 pm

The company becomes the director. The company issues a power of attorney to the individual (a simple document, just says that the individual has all power to act on behalf of the company, or whatever they want it to say, signed by enough directors of the company to form a quorum). Individual attends board meetings and votes on behalf of the company.

DM

AF62
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Re: Residents management company - Directors restricted to company members

#134158

Postby AF62 » April 23rd, 2018, 2:37 pm

Thanks for all the responses.

The resident hadn't realised the restriction (they hadn't seen the Articles) and as soon as it was mentioned they graciously stepped back without any fuss. There seem to be enough other residents who are members who want to step forward so all seems well.

pochisoldi
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Re: Residents management company - Directors restricted to company members

#134420

Postby pochisoldi » April 24th, 2018, 12:56 pm

AF62 wrote:Thanks for all the responses.

The resident hadn't realised the restriction (they hadn't seen the Articles) and as soon as it was mentioned they graciously stepped back without any fuss. There seem to be enough other residents who are members who want to step forward so all seems well.


I know this may seem pedantic, but theres a need to be careful here with wording here, only company members can be directors, and a resident may not necessarily be a member.
For example, for example, a tenant (where the property is let out), a lodger, or the spouse of someone who owns the property (and membership of the manco) in their own name.

(In most cases "company member" means shareholder, and in that case only "persons" named on the company's share register can be directors, noting that a company is in itself a legal person.)

PochiSoldi

AF62
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Re: Residents management company - Directors restricted to company members

#134482

Postby AF62 » April 24th, 2018, 4:29 pm

pochisoldi wrote:I know this may seem pedantic, but theres a need to be careful here with wording here, only company members can be directors, and a resident may not necessarily be a member.


Noted, and this is what sparked the issue.

My understanding is the remaining residents who have put their names forward are shareholders, but I agree worth double checking. Being a spouse and not an owner/shareholder may theoretically be an issue, so I will double check.

Thanks again.


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