Flat management companies - guarantee companies v share companies - general meeting votes

Most of the flat management companies I deal with are limited by shares.  One share for each flat so if someone owns multiple flats they have multiple shares held and therefore more votes as a general meeting of the company.

Can anyone confirm that the situation is different in a guarantee company.  The articles typically say that each unit holder can apply to be a member of the company and under votes of members says every member can have one vote.  So if  some own multiple flats it would appear that rather than applying to be a member for each unit membership is acquired after the first application and then they are recognised as being one member with one vote. 

So in essence guarantee company votes by member - a member is one person - one vote regardless of the number of units held.  Share capital company votes by shares held, more shares held greater voting power.

 

Comments

Flat management Companies

RBlanks | | Permalink

You are essentially correct.  The ICSA have a handy guide for CLGs if you need more info. 

Flat management companies - limited by guarantee and RTM compani

Maria Kabakova | | Permalink

Hello

Below I will list information on flat management companies I came across and I hope this is of use to you.

Property management companies that are limited by guarantee are normally commonhold associations or RTM (Right To Manage) companies. RTM companies are set up so that the leaseholders of flats can exercise their right to manage the building they live in. This right to manage must be exercised through the RTM company, set up for that purpose.

Only those who are unit-holders can be admitted as members of the guarantee company.

A unit - holder will be either the person/s to whom a lease of a unit has been granted or assigned or the person/s holding the freehold of a unit.

Unit-holders have to apply by sending a membership application to the Company to be admitted as members to the guarantee company. The Directors then pass a resolution to admit the unit-holder whose details and date of admission are entered into the Register of Members. The membership is only legally effective when recorded in the Register of Members. The unit-holder can then vote at general meetings.

At general meetings, voting will be on a show of hands or on a poll, with every member present in person, by proxy or (being a corporation) by corporate representative, having one vote in respect of each unit that member has a freehold or leasehold interest in.

Regards

Flat management companies - member or members

pkhaynes | | Permalink

Maria Thank you for your posting.

So in essence are you saying that where a person holds more than one flat, say 2, they should complete a membership application for each flat so that they are a member of the company twice and therefore have 2 votes as a general meeting of the company.

The articles of association of the company I am looking at state every member present in person shall have one vote.  On a poll every member present or by proxy shall have one vote.  There is no definition of a member.  If you hold 2 units then are you 2 members or as you are one and the same person are you just a member (singular) present in person.  The articles do not state that there is one vote per flat as some articles for guarantee companies have stated which is then clear.

Flat Management

Hollyhurst | | Permalink

Generally the articles do suggest one person - one vote. Having checked the ICSA Mettings and Minutes Manual again that seems to be the opinion.

If the owner wishes to increase the number of votes avaiable then all he would have to do is appoint proxies for each flat. Then more peole attend the meeting each wth one vote.

Also it may be possible that the owner appoints a proxy which if a poll is demanded could then vote for each flat.

Possibly a resolution shoudl be put to the meeting, hopefully before any problems arise to mke the situation clear.

It is important to separate the directors, who make decisions and are responsible for them, and the owners who may try and make decisions but are not then accountable.  The best plan is to have a formal AGM with the normal agenda items, close the meeting and open a general dicussion period to gather views, but do not take a vote. The directors may need to consider the matter further before making any final decions. If the owners do not like it they have the option of removing the directors and becoming directors themselves. 

  DAB

Proxy forms

pkhaynes | | Permalink

Holly, Thank you for your comments on appointing a proxy to create the additional vote.

I know that some individuals own more than 2 flats, so would they need to appoint a different proxy for each flat or can the form just direct the chairman of the meeting to vote in accordance with the proxy form on any particular resolution?  Having said that the standard proxy form say xxxx being a member of the company hereby appoint and the articles that I am looking at says every member present or by proxy shall have one vote so this implies one vote regardless.

Maybe a resolution could be put to a future meeting to amend the articles to effectivley give one vote per flat. 

 

Flat management companies, limited by shares or guarantee

jimlowe | | Permalink

Hi,

We set up a lot of these companies and act as company secretary for quite a few as well.

In a flat management company, whether a member has one vote or one vote per unit is a question for the articles. Our standard guarantee flat managemant articles provide that a member is entitled to one vote for each unit in respect of which s/he is a member. (They also provide that where there are joint owners of a unit, they can both be members but only get one vote between them, exercised by the first name on the register of members if they cannot agree.)

Jut a point about Right to Manage companies, these are not necessarily the same as ordinary flat magament companies. An RTM company must indeed by limited by guarantee, but must have a special set of articles as laid down by the RTM Companies (Model Articles) (England) Regulations 2009. This type of companmy is for the special situation where some or all the tenants want to exercise their statutory rights to buy the freehold from an unwilling landlord under the Commonhold and Leasehold Reform Act 2002. Most guarantee flat management companies are not of this type.

-- Jim Lowe Company Law Solutions Limited Q16, Quorum Business Park, Benton Lane, Newcastle upon Tyne, NE12 8BX www.companylawsolutions.co.uk

Flat Managemnt

Hollyhurst | | Permalink

I would check all the regulatioons you have and only produce some form of change to the articles if you think this is going to be a problem in the future. e.g. do you have a multiple owner who is going to try and dictate what happens. Very often the lease and articles are not the easiest things to read and can be difficult to interpret, and once you start on alterations you will be still rewriting them in a years time.

With regard to another comment about the use of RTMs. The poster has misunderstood the purpose of RTMs, which is the right to take over the management of a development. The freehold can be purchased by an RMC or an RTM.  

 

Flat management Companies / Proxy forms

RBlanks | | Permalink

I would be very wary of allowing proxies to be appointed for each unit held unless the articles specifically allow this.

The Articles, if drawn up properly,s should be quite clear and if it says a member may appoint a proxy, as that member only has one vote it would be wrong to effectively create another vote by allowing more than one proxy. 

CA 2006 section 5 states specifically that Any provision in the constitution of a clg that purports to divide the company's undertaking into shares or interests is a provision for share capital. and that a CLG cannot become a company with a share capital. (there are still some old ones around but it has been illegal to form or become one since 1980).

I am afraid there is no easy answer to this other than to analyse the articles very carefully, particularly the section dealing with qualification for membership as that may give you a loophole,  and apply them as written.  If they do not suit the actual situation then they should be amended but be careful to follow the right procedure, especially if the company was formed before the 2006 Companies Act, and make sure that the articles can be amended the way that you want them to be otherwise you create even more problems.

 

MonicaP's picture

Flat management companies

MonicaP | | Permalink

I absolutely agree with the above posting with regards to the use of proxy's.  Proxy's are not meant to create additional voting power. I would be very wary about using this process.

Best wishes

Monica

Flat Management Companies

Maria Kabakova | | Permalink

I agree with RBlanks and Monica and could not stress enough that the Articles should be thoroughly checked.   I would not advise any of my clients to increase the voting rights of a unitholder by appointing proxies.  In order for a unitholder to have more weighted voting rights, the Articles of Association would need to be changed.  The members have to pass a Special resolution to approve this.

Regards

Flat Manegemnt Companies

Hollyhurst | | Permalink

Having looked further and taken advice.

R Blanks states that s 5 does not allow for "multiple membership" for guarantee companies. So one member one vote regardless of the number of units. Question: if the old Articles allow for more than one vote is that still allowed.

I have also been referred to s 324 which allows only one proxy per member.

So one vote per member and only one proxy.

Robert: I have already suggested to ICSA that the booklet is updated especially with reference to RMCs, which apparently cause a lot of questions.

 

 

 

 

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