QUESTION
I bought a leasehold flat back in 2008 and at that time the management company belonged to the freeholder and directors from there. Their memorandum of articles was prepared to favour them.
In 2011 the freeholder agreed to hand over the management to the residents in the form of an RMC. We had the first ever AGM in 2011 and we allowed random Leaseholders to become directors assuming the RMC process will complete. (New company number, MOA approved by majority, management policy etc)
Without our knowledge as members of the management company, the managing agent was appointed and he was acting as the company secretary as well.
The managing agents manipulate the RMC in their favour and I have been asking to complete the RMC process for years but they never wanted to and currently they are using the freeholder MOA.
Over the last 10 years residents directors have been appointed with our knowledge and our voting rights being violated.
Can you advise the following?
1. Can RMC use the previous company number?
2. Can RMC use the previous company MOA?
3. Can they appoint directors without giving other members voting?
As a result, the managing agent makes money producing inaccurate service accounts and various maintenance issues.
ANSWER
Where developers in granting leases of new properties on a development make those tri parte so as to include as a party to the leases a management company for the development, it is common for the developer to run that management company until the development is completed and all units sold before handing control of that management company to the leaseholders. Often that hand over process involves the appointment of new (leaseholder) Directors to the existing management company and there is therefore no need to form a new company.
It is also common practice where a managing agent is appointed by a company for a representative of the managing agent to be the secretary of the management company that has appointed them. This is mainly because the role of company secretary is procedural and thus something that fits neatly into the role of the managing agent.
The management company will often seek and be advised by the Managing Agent on many issues relating to both management of the block and company procedure. That is ultimately what the managing agent is being paid to do.
In answer to the numbered questions raised:-
My views, subject to the caveat that the enquiring reader seek their own advice before taking further action, are:-
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Can an RMC use a previous company’s number?
A unique company number allocated by Companies House to any new company on incorporation. However, where the current RMC has evolved out of the company named in the leases then it will retain the former company’s number but may have amended its name from that of the former company.
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Can the RMC use the Memo & Arts of another company?
The RMC can adopt the Memo and Arts that it choses on incorporation and, subject to the rules set out in the Articles, likely amend those later too.
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Can the RMC appoint Directors without seeking a members vote on that appointment?
The Articles of the company will set out how Directors can be appointed/removed. Commonly, that will allow the Board to appoint Directors if it so wishes and without the vote of the shareholders. If the Articles so provide the appointment of a Director by the Board might require a later confirming vote of the shareholders at the next AGM/EGM but this is not always required and reference to the Articles will be key.
The final point to make is that it appears that the enquirer is concerned that either the company is not run properly or that the Directors of the Management Company are too easily influenced by the agent or others. If that is the case then the recommendation has to be to put yourself forward to become a Director of the Management Company. Once there take your time to consider the conduct of the Board and, if your concerns remain, take steps to change those or, if necessary, the make up of the board of directors to one more in line with your views on how the company and the block should be run.
I trust that assists you.
Kevin Lever, Partner at KDL Law
