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Conference on Multi-Unit Developments

Conference on Multi-Unit Developments. The Law Society Blackhall Place, Dublin 7 25 January 2007. Highlights of Draft ODCE Guidance on Apartment Owners’ Management Companies (AOMCs). Paul Appleby Director of Corporate Enforcement. Overview. Introduction Some Important Distinctions

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Conference on Multi-Unit Developments

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  1. Conference on Multi-Unit Developments The Law Society Blackhall Place, Dublin 7 25 January 2007

  2. Highlights of Draft ODCE Guidance on Apartment Owners’ Management Companies (AOMCs) Paul Appleby Director of Corporate Enforcement

  3. Overview • Introduction • Some Important Distinctions • Recommended Good Practice for AOMCs • Limited ODCE Role vis-à-vis AOMCs • Some Concluding Comments

  4. The Distinct Features of Apartment Living • Interdependency • A need for ongoing management • A consequential need for ongoing funding • The need for apartment owners to participate in deciding what arrangements are appropriate

  5. Chapter 1: The Aim of ourGuidance • A self-help resource for members of management companies in running their collective affairs • It strays beyond pure Company Law and deals with wider issues of good governance • It suggests that improvements are achievable within the present imperfect legal framework • It does not directlyadvocate Law Reform as such

  6. Chapter 3: Management Companiesand Managing Agents • Each Management Company is composed of the apartment owners who are its members • The Managing Agent is not the Management Company • The Managing Agent is a contractor of the Management Company

  7. Chapter 4: The Key Phases in the Evolution of an AOMC • The Developer-Only Phase • The Developer-and-Owners Phase • The Owners-Only Phase • Directors must always act in the company’s interest

  8. Chapter 7: Members’ Meetings • Every apartment owner/member is entitled to participate • Standard agenda of an Annual General Meeting includes: • consideration of company’s financial statements • consideration of the directors’/auditor’s reports • election of directors • appointment/re-appointment of the auditor/fixing audit fee • Extraordinary General Meetingsare sometimesrequired • Minimum notice period for AGMs is usually 21 days

  9. Chapter 9: Directors’ Meetings • Some formality desirable, e.g., regular meetings, advance notice, draft agenda, minutes, etc. • “Stocktaking” Meetings to check on critical items (e.g., title deeds, insurance), say after transfer of common areas or after new directors are appointed • Regular Budget Meetings • Occasional Long Term Planning Meetings

  10. Chapter 12: Record Keeping • Operational Records: Contracts, Insurance, Title Deeds, Correspondence, Minutes of AGMs/Directors’ Meetings • Financial Records: Accurate income/expenditure details -keeping proper books of account is a legal duty • Statutory Records: Registers of Members, Directors, etc. • AOMC must decide if the Managing Agent can discharge this task/conditions for doing so (e.g., directors’ access)

  11. Chapter 13: Bank Account Operation • Ideally, AOMC funds should be held in a named company account(s) and not be pooled with Managing Agent funds • Consider in particular keeping sinking fund monies separate from day-to-day expenditures • Need for an appropriate degree of AOMC control over company funds, including what authority the Managing Agent will be given to pay bills, sign AOMC cheques, etc • Not a company law issue

  12. Chapter 14: Operational/Financial Reporting • Directors’ Annual Report to Members on the state of the AOMC’s affairs should deliver both good and bad news • AOMC Financial Statements should contain ‘comprehensive and intelligible financial information’ • Companies Acts lay down the minimum requirements. Directors should consider going further: • service charge payment performance • level and extent of insurance cover • necessary maintenance expenditure

  13. Chapter 16: Service Charges • Not a company law issue!! • Service charges are usually set by the AOMC’s directors in consultation with the Managing Agent and having taken account of members’ representations • Service charges include inflexible elements (e.g., lighting, insurance, repair costs) plus optional items (e.g., CCTV) • Value for money can be secured by regular competitive tendering, a good contract and insistence on compliance • The safeguard of the auditors’ certificate

  14. Chapter 17: The Relationship with the Managing Agent • Relationship is based on agreed contractual terms • Should be a Standard Contract • AOMC defines the nature/quality of services needed • AOMC selects an agent to provide the services • Performance is a matter of contract law – it’s not a company law issue

  15. Chapter 19: Changing the Articles of Association • Articles are the company’s “internal rulebook” • 75% of voting members at an EGM can alter them • Suggested changes include: • when the membership of Developer nominees will cease • AGMs to be held convenient to apartment development • removal of voting ban for member in short-term arrears • restricting a director voting on a contract of interest to him/her

  16. Chapter 21: Winding-Up/Strike-Off • Winding-Up: Seldom (if ever) the appropriate outcome. Refinancing by members a better option • Strike-Off: A real hazard – but one which can be avoided by keeping annual returns up-to-date • Strike-Off is likely to be the end result of more fundamental pre-existing problems in the AOMC

  17. Chapter 22: The ODCE Role • We do not regulate service charges, managing agents or the property law aspects of AOMCs • ODCE’s only role relates to the Companies Acts • Try to help yourself before seeking ODCE redress • Our preference is for administrative remedies • Participation at AGMs/on the Board is an example of active citizenship on behalf of your community

  18. Conclusion • Draft nature of the present Guidance • how can it be improved? • is it relevant to other forms of management company? • ODCE’s consultation period ends on 30 March 2007 • Hope to publish a final ODCE “Governance Handbook” later in 2007 supplemented by a shorter document • Have agreed to participate in a Ministerial high level group which will address the wider problems

  19. Conclusion • Perception that Company Law was the problem • Pleased that the LRC recommended that this legal framework should continue to operate for AOMCs • Guidance suggests how Company Law supports informed and accountable decision-making • We are for sensible regulation, and we are open to hear any case for relaxing the current requirements

  20. Draft AOMC Guidance is available atwww.odce.ie and on request from info@odce.ie

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