Does Freeholder have to be director of our RTM Company?

Does Freeholder have to be director of our RTM...

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The 4 leaseholders of a property in Kent, myself included, started an RTM company because we did not like the way the property was being managed by the Freeholder, who also ran the management company. We had a request, as by law, to include him as a member of the RTM company which we have done but should he be a director of the company and registered at Companies House?

The history with him as one of the directors of his own management company was to charge us extortionate amounts for services/ insurance and then not do the work to the time limits of our leases. He also had a habit of threatening the leaseholders with court actions and I'm worried that he may now try this again if he thinks we are not running the RTM company properly.

If he was registered as a director would that be advantageous to the RTM company or not?

He has also requested the following items to be sent to him but I'm not sure if he should have all details. Can anyone confirm if all these requests are acceptable please:

"So that I may familiarise myself with the management of the RTM and the property, would you please provide me with the following information as soon as possible.

Memorandum & Articles of Association

Company Accounts – (since inception)

Annual Returns – (since inception)

Minutes of Annual General Meetings and all other meetings – (since inception)

Directors & Officers Insurance schedule – (current)

Managing Agents details and copy of the management contract

Details of Managing Agents membership to professional bodies i.e RICS, ARMA etc

Copy of Health & Safety Document for the RTM/Managing Agent – (current)

Maintenance Accounts – (since inception)

Budget of expenditure – (current account period)

Building Insurance schedule and full policy document – (current)

Asbestos Survey – (current)

Fire Risk Assessment – (current)

Electrical Installation Condition Report for the Common Ways (current)

Re-building Cost Assessment – (current)

Details of the companies bank account and what provisions are in place to protect clients funds

Full details of any major works carried since inception and any works planned in the next three years

The following details for each flat owner:

Full name(s)

Address

Telephone numbers

Email address"

Replies (18)

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By johngroganjga
21st Aug 2014 12:50

He is not entitled, as a shareholder, to any of the information he requests.

He will of course be entitled to future accounts (but not past ones) and to notices of general meetings (and to attend and be heard at such meetings).

Everything will change if he becomes a director. 

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Replying to fawltybasil2575:
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By mcpee
21st Aug 2014 12:44

How do we officially make him just a member...

Thanks for that information John.

How do we recognise him as just a 'member' and not a director? We have been ill advised then, as we placed him on the Companies House website directory as a new director of the RTM company to acknowledge his wishes - can he be easily removed or have we just made one almighty mistake???

mcpee

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Replying to fawltybasil2575:
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By mcpee
22nd Oct 2014 19:26

A continuation of this comment...

I informed the landlord that he was not entitled to any of the information in my original post and this was the reply that I received the other day:

 

"Items 1-5 on my list are items which I am entitled to as a member of the company to the same extent as any other member of the company.

Disclosure of the balance of the documents would fall within the management functions of the RTMC.  By section 97(1) CLRA 2002 ‘any obligation owed by the RTMC  is also owed to each person who is landlord under the lease’.  Nothing in the Act provides that the RTMC may charge for complying with its obligations and failure to do so may give rise to a default notice under s.107 CLRA 2002.

Please can you let me have these documents within 7 days otherwise I will instruct my solicitors to serve a default notice as a precursor to issuing proceedings in the County Court."

 

A reminder from my original post of the items 1-5, as he mentions are:

Memorandum & Articles of Association

Company Accounts – (since inception)

Annual Returns – (since inception)

Minutes of Annual General Meetings and all other meetings – (since inception)

Directors & Officers Insurance schedule – (current)

 

So - who is right?

 

Thanks

 

mcpee

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Replying to fawltybasil2575:
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By mcpee
22nd Oct 2014 19:32

So the landlord has issued the following:

johngroganjga wrote:

He is not entitled, as a shareholder, to any of the information he requests.

He will of course be entitled to future accounts (but not past ones) and to notices of general meetings (and to attend and be heard at such meetings).

Everything will change if he becomes a director. 

 

I informed the landlord that he was not entitled to any of the information in my original post and this was the reply that I received the other day:

 

"Items 1-5 on my list are items which I am entitled to as a member of the company to the same extent as any other member of the company.

Disclosure of the balance of the documents would fall within the management functions of the RTMC.  By section 97(1) CLRA 2002 ‘any obligation owed by the RTMC  is also owed to each person who is landlord under the lease’.  Nothing in the Act provides that the RTMC may charge for complying with its obligations and failure to do so may give rise to a default notice under s.107 CLRA 2002.

Please can you let me have these documents within 7 days otherwise I will instruct my solicitors to serve a default notice as a precursor to issuing proceedings in the County Court."

 

A reminder from my original post of the items 1-5, as he mentions are:

Memorandum & Articles of Association

Company Accounts – (since inception)

Annual Returns – (since inception)

Minutes of Annual General Meetings and all other meetings – (since inception)

Directors & Officers Insurance schedule – (current)

 

So - who is right?

Thanks

mcpee

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By johngroganjga
21st Aug 2014 13:05

He is a member by virtue of holding a share.

If he has not been appointed as a director why did you notify Companies House that he was one?

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Replying to johngroganjga:
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By mcpee
21st Aug 2014 14:11

Thanks again John

johngroganjga wrote:

He is a member by virtue of holding a share.

If he has not been appointed as a director why did you notify Companies House that he was one?

Unfortunately we panicked, thought it was the correct thing to do on reading his request and threatening court action ( as is his history with the leaseholders of the property) - obviously we now realise our mistake - we have all discussed it and would like to remove him as a director but is it that simple to agree and then remove his name as a director from the company listing?

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Replying to Tax Dragon:
Euan's picture
By Euan MacLennan
21st Aug 2014 16:01

Not quite that simple

mcpee wrote:

... we have all discussed it and would like to remove him as a director but is it that simple to agree and then remove his name as a director from the company listing?

The members (shareholders) of the company have to hold a meeting and pass a resolution under s.168 CA 2006 of which special notice (28 days under s.312) has been given to all the members, including the offending director.  As an ordinary resolution, it is passed by a simple majority of votes, which unless you have different voting rights, the 4 of you should achieve.  Only then can you notify Companies House of the termination of the director's appointment.

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By cbp99
21st Aug 2014 13:01

OP - Are you aware of

 the Leasehold Advisory Service www.lease-advice.org which is a government funded organisation, not to be confused with private organisations that may have similar names. They will be able to advise on the rights of the freeholder vis-a-vis the property and its management.

These rights (or absence of them as the case may be) are not to be confused with company law, which dictates the rights of directors and shareholders vis-a-vis the company and other directors/shareholders.

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By bajones
21st Aug 2014 13:26

Two different sets of rules

Don't confuse obligations under Companies Act with Landlord & Tenant Act.

Under L&T legislation you have taken on legal responsibility of managing the property so the freeholder certainly has no right to inquire into the management of the property.  As freeholder he would have the lessees' info, which is the only thing relevant, except perhaps the proof that the building is adequately insured.  Surely a solicitor helped you with the drafting of the RTM documentation?

Do yourself a favour, keep the Trust accounts out of the RTM accounts then he won't have financial info of the service charge trust either.  This is generally recognised as best practice, so your accountant *should* be doing this.

You should be able to remove as director by passing an ordinary resolution, but check your mem & arts for oddities.  Another issue with RMCs & RTMs is that they tend to make every single shareholder a director, much better to vote a couple in annually.

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Replying to neanderthal:
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By mcpee
21st Aug 2014 14:40

Thanks bajones, and others.

bajones wrote:

Don't confuse obligations under Companies Act with Landlord & Tenant Act.

Under L&T legislation you have taken on legal responsibility of managing the property so the freeholder certainly has no right to inquire into the management of the property.  As freeholder he would have the lessees' info, which is the only thing relevant, except perhaps the proof that the building is adequately insured.  Surely a solicitor helped you with the drafting of the RTM documentation?

Thanks bajones, and others.

So, apart from our huge mistake of listing him as a director, of all the requests from the list above we only have to really send him the insurance policy information? You are right - he should have the lessees information already.

A solicitor helped to set up the RTM but once we were registered, and having received payment, he then stopped answering our queries and is no longer contactable - hence the mess we find ourselves in and the reason for asking questions on here to help me sort the problems out, so I appreciate all of you putting in time to reply.

The more answers I get, the more I learn!

Cheers

Mcpee

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By WhichTyler
21st Aug 2014 15:47

I suggest...

... that you get another (better) solicitor. From what you have said, money spent understanding & putting things right now will be nothing compared to the aggro of dealing with the wrong setup in years to come...

 

 

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Replying to danishgandhi:
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By mcpee
21st Aug 2014 15:55

Yes! you are right

and I have been passed on details of a good solicitor so hopefully we can get things sorted.

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By johngroganjga
21st Aug 2014 16:28

But has he in fact been appointed?  Or is the only error that of notifying Companies House that he had been appointed when he hadn't?  What do the company's minutes, register of directors and the forms filed at Companies House say?

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Replying to dmitchell:
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By mcpee
21st Aug 2014 18:25

He has not been appointed yet...

The error is that we have listed him as a director on the Companies House web site but I haven't changed any other paperwork yet so no, he is not named on any other forms filed or any minutes.

I can't find any reference to what to do if we have mistakenly named him before officially appointing him.

I'm thinking (and hoping) that as we haven't yet officially voted as a group then the listing may just have been too hasty and not worth much.

Does that help? I don't mind if he complains about it as we have plenty of things to complain to him about.

This site really is proving helpful.

Thanks people.

 

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By bajones
21st Aug 2014 17:38

Don't take my word for it, I'm an accountant not a lawyer.  I do have experience with RMCs/RTMCs but have never dealt the creation of one hands on.  Do you have a managing agent, and if so, do they have any RICS members?  Might be cheaper than a property lawyer for just clarification of the freeholder's rights. 

The relevant legislation is here http://www.legislation.gov.uk/ukpga/2002/15/part/2/chapter/1.

RTM legislation was put in place to prevent mismangement by freeholders and their agents so I can't see that it would allow a landlord to hijack an RTM company.

As far as removing him as a director, it sounds like John is right; Companies House is supposed to reflect the company register not be the company register.  But if he is likely to kick up a stink, you may be better following protocol and voting him out.

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By james3
21st Aug 2014 23:06

I would say

Email Companies House and say you submitted the AP01 in error and the person is not in fact a director.

[email protected]

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By mcpee
15th Sep 2014 12:48

Further to the conversation...

For anyone's interest this was the reply from Companies House on the matter:

"The form AP01 is only to notify us of activity within the company. The fact that procedures have not happened to vote him in has no baring on his appointment details with Companies House.

To remove any trace of a director being appointed to the company you will need to submit a form RP02A to apply  to have the form AP01 (and corresponding form TM01) removed.

A form RP02A will be required for each document you are applying to rectify. The form RP02A is available on our website www.companieshouse.gov.uk<http://www.companieshouse.gov.uk/>.

When the registrar receives a fully completed RP02A, a notification of the registrars intention to rectify the public register will be issued to all serving officers of the company, to the registered office of the company and to the individual to whom the material relates. If no objections to the proposed rectification are received within 28 days, the registrar will remove the incorrect information from the public register and the applicant will be notified.

Please arrange for form RP02A to be submitted in respect of the incorrect information on the forms AP01 and TM01 at your earliest convenience."

Thanks for everyone's help so far.

mcpee

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By johngroganjga
22nd Oct 2014 19:32

The advice you need now is legal advice.

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