Directors and Company Secretary
The RMC is a legal entity which act as a person in its own right and it is the RMC Director(s) who exercise all powers on behalf of the company. The most significant difference between Directors of commercial companies and those of an RMC is that Directors of the latter are voluntary and not usually paid! They will nevertheless be required to be familiar with the lease(s) and abide by the RICS Service Charge Residential Management Code and Additional Advice to Landlords, Leaseholders and Agents (3rd Edition). They will also need to abide by the best practice guide of the ICAEW Tech 03/11 Residential Service Charge Accounts as they will be responsible for both the service charge accounts (monies paid by leaseholders and held in trust) and the statutory accounts of the company which is money generated from premiums such as ground rent and lease extensions. There are mixed opinions as to whether both accounts should be combined but Tech 03/11 states that they should be prepared separately. Whilst it doesn’t expand on this, the key reason is that service charge accounts are required to follow the terms of the lease making them incompatible with the statutory requirements laid down by Companies House.
They will also need to be familiar with block management legislation.
Who can be an RMC Director?
Anyone can be a Director unless they have been disqualified under the Company Directors Disqualification Act 1986, or by being an undischarged bankrupt. There are no maximum age limit but s157 of the Companies Act 2006 (minimum age for appointment of director) imposes a 16 year minimum and s159 of the same Act (existing under age-directors) states that directorship ceases where a company has an under-age director on the implementation date (1st October 2008). Also there are no statutory limitations as to nationality or residence so it is possible to merge these into the company Articles but this rarely happens. It is unusual for modern company articles to impose a share qualification but if they do then the shares must be acquired within two months of the Directorship appointment.
Due to the logistics of running a block of flats, RMC’s will invariably use the services of a managing agent. They will however need to resist the temptation to sit back and let them get on with it as they will need to work closely with them in the following areas:
- Health, safety, maintenance and repairs of the common areas,
- Service charge budget setting,
- Service charge collection and debt recovery,
- Adherence of the process for major works and long-term qualifying agreements,
- Ground rent collection (if the company does not do it themselves),
- Lease extensions (an agent will often outsource to a solicitor if the RMC does not wish to handle them through their own company solicitor).
They must also be prepared to act as any other commercial employer would which includes questioning any action taken on their behalf by the agent that they do not understand.
All this also applies if they self-manage.
Whilst the role of the Company Secretary has been abolished it is still highly recommended that RMC’s continue to use one. There are no specific requirements/qualifications needed to act in this capacity.
Fees will cover:
- Acting as registered office;
- Secure the holding of and the ongoing maintenance of the statutory books and registers;
- Receiving and re-directing post received at the address;
- Monitoring official correspondence received from Companies House to ensure compliance with statutory deadlines and any other matter that may arise;
- Preparing and filing the Company’s annual return each year; and
- Filing the Company’s accounts.
Volunteering to become an RMC Director is a role that should be given careful consideration due to the responsibilities that will be taken on.
For example, under the Corporate Manslaughter Act of 2007, not only can Resident Management Companies be prosecuted under criminal law for serious breaches of health and safety law but the Health & Safety Offences Act 2008 raised the maximum fine for offences in the lower courts from £5,000 to £20,000. It also increased the number of offences for which an individual can be imprisoned. It is therefore vitally important for RMC Directors to be aware that it is they who keep overall responsibility for the health and safety of their block, regardless of whether they delegate to others or not.
Failure to prepare and keep records, maintain the company registers or file the accounts can result in the Directors being held liable for penalties, criminal prosecution and possible disqualification. But how can RMC Directors protect themselves against someone making a claim against them? The answer is that of Directors and Officers Liability Insurance and more on this can be read about in an excellent overview of the subject by Laura Severn, of award-winning Brady Solicitors.