Rupert Hambly, director of Peninsula Management, welcomes the launch of a Government initiative for property management company directors which chimes with his own views on a potentially thorny issue.
Frankly, it might have not have registered much on the public consciousness amid a plethora of Government announcements at the start of November 2020, but if you are the director of a residents’ management company (RMC) then one particular Whitehall pronouncement should have you sitting up and taking notice.
Because while the Treasury and Number 10 were issuing their understandably well-publicised policy updates in the face of the economic threats posed by the covid-19 pandemic, elsewhere Companies House launched a vital awareness campaign aimed at RMC directors.
Those of us who work day in, day out with RMC directors welcome this Government initiative and would encourage all those affected to try the online tool and make sure they are up to speed with their responsibilities. They should also ensure they receive the proper follow-up training as a matter of urgency.
I couldn’t agree more with the comments made by Bob Smytherman, chair of the Federation of Private Residents’ Association directors, in supporting the launch of the initiative when he said: “Becoming a director of a company is a significant step and the position comes with a number of responsibilities. This additional support to help directors understand these responsibilities will, I’m sure, prove to be incredibly valuable.”
Valuable indeed. Often the motivation for those agreeing to become directors of an RMC - in what is generally a voluntary unpaid role - is varied and personal. It could be wanting to ensure things are done, a wish to be involved, perhaps having appropriate experience and expertise or just responding to peer pressure, i.e. “someone has to do it”.
But understanding what being a director of an RMC entails is far from simple or obvious. The roles and responsibilities are becoming increasingly more complex and involved for directors, adding to the increasing trend to ensure professional managing agents are appointed. Mistakes can be expensive, as can omissions. Ignorance is no defence.
The duties of an RMC director are chiefly:
- To act within the powers of the company – a director must act in accordance with the company’s constitution (i.e. the Articles of Association) and exercise their powers for the proper purpose;
- To promote the success of company – a director must act in good faith in the way they consider and promote the success of the company for the benefit of its shareholders/members as a whole;
- To exercise independent judgment and not be swayed by a dominant director;
- To avoid conflicts of interest – a director must avoid situations which they have a direct or indirect interest that conflicts with or may conflict with the company’s interests. For example, a director would not be allowed to appoint a contractor or company they have a financial interest in unless that interest is declared;
- Not to accept benefits from third parties – a director must not accept any benefit (including a bribe) from a third party which is given because they are a director;
- To exercise reasonable care, skill and diligence.
In addition to the corporate responsibilities there are legal responsibilities for things like fire safety, ensuring appropriate property insurance etc. I would always recommend that the RMC takes out a directors’ and officers’ liability insurance policy to protect its directors against genuine mistakes they may make.
So, in short, it can be a minefield out there, but with care, attention to detail and the right advice it is a minefield which can be safely negotiated.
Rupert Hambly, director of Peninsula Management