Notice of Participation and Company Memo and Arts
After it was decided that due to my leasehold knowledge I should be the communications link between the company and the managing agent (as both Directors were in full time work), the next step was that of serving the notice of participation on the other qualfying leaseholders who did not attend the initial meeting, and inviting them to become members. This must be sent using the prescribed form. It must state:
- The RTM company intends to acquire the right to manage;
- The names of the members of the RTM company;
- The invitation to the recipient to become a member of the RTM company;
- Other information required by regulations:
- The RTM company’s registered number and the address of its registered office;
- The names of its directors and, if applicable, the secretary;
- The name of the landlord, plus the name of any other person who is party to the lease other than the leaseholders.
The notice must also state:
- That the RTM company will take over the landlord’s management functions under the lease, including the enforcement of tenants’ covenants and the granting of approvals. In the case of buildings containing flats under the control of the landlord, or commercial units, the notice must make it clear that the management powers obtained through RTM will not extend to those flats or units;
- That each member of the RTM company may be liable for the landlord’s reasonable costs arising from service of the notice to exercise the right to manage. (This is to ensure that everyone is aware of the potential financial implications of involvement in a RTM application.);
- Whether or not the RTM company intends to employ a managing agent to manage the building (and, if a prospective agent has been identified already, his name and address); or, alternatively, whether the company intends to appoint the current managing agent.
If the RTM company does not intend to appoint an agent but to manage the building itself, the notice must give details of the management experience, if any, of the existing members of the company.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Whilst the legal obligations of the company are governed by company law, at the heart of all companies lies the Memorandum and Articles of Association. The Participation Notice must be accompanied by these or state where they may be inspected and copies taken; the notice is considered not to have been served if these two steps are ignored.
The Memorandum will state the following:
- The company name;
- The company type;
- If the company has shares, its share capital and the value of each share (unless the company is limited by guarantee);
- It’s objectives (what it will do). Since the mid 1980s the objects clauses have been simplified and expressed to be for flat management or commercial objectives;
- Shareholder names;
- Where the registered office is situated.
- A statement of limited liability to warn anybody dealing with the company that the liability of its shareholders is capped, normally to the value of the authorised capital.
The Articles set out the rules for running the company’s internal affairs and every company formed under the Companies Act 2006 will have them. They are designed to give a series of checks and balances between shareholders and directors such as:
- The issuing and transferring of shares;
- The calling of general meetings, procedures and members voting rights;
- The calling of Directors’ meetings, voting at board meetings, the disclosure of personal interests and the process for appointing and removing Directors;
- An indemnity which means that directors and other officers will be indemnified if, through their actions, the company makes mistakes.
Note: Companies registered from 1st October 2009 (or adopting new articles from that date), do not have a traditional memorandum of association but new Model Articles that simplify the way a company is run and which is a replacement of Table A. Provisions that were in the memorandum are now to be treated as if they were provisions of the articles. Companies registered before this date can continue to run under their old memorandum and articles, but need to be aware that these do not show current legislation under the Companies Act 2006.
Before registering an RMC with Companies House, form INO1 must be completed which requires the following;
- The proposed company name;
- The UK address of the registered office (which doesn’t have to be within the block of flats but it must not be fictitious;
- A list of names of the proposed officers, Directors(s) and Company Secretary.
Changing the Articles
Whilst the company can set up its own rules, because they are legally binding on the company and its shareholders/members they cannot include rules that are against the law. Having said that, the majority of companies, especially small ones, tend to rely on model articles instead of drawing up their own. The company’s articles are not set in stone and sometimes the need to change them can arise for a number of reasons.
Any change must be in the genuine best interests of the company, not just designed to meet the needs of some members. While this doesn’t mean that every member must agree to a change to the articles, any change cannot be used by a majority to discriminate against the minority or deprive minority shareholders/members of their statutory rights.
Retrospective changes need to be both legal and fair. In particular, s25 of the Companies Act 2006 (effect of alteration of articles on company’s members) does not allow the company to insert retrospective provisions that need members to increase their shareholdings or give further funds to the company without the members specific agreement in writing.
The Articles also can’t be changed to remove the ability to make further changes to them in future. Having said that, there may be conditions attached to making alterations such as a contractual arrangement (like a shareholders’ agreement) for example which may effectively restrict the ways in which the articles can be amended.
Once a legitimate need to update the articles of association has been identified, this change can be implemented by:
- Amending the wording of one or more clauses in the existing articles;
- Adding in new or removing clauses from the existing articles; or
- Adopting an entirely new set of articles (completely replacing the previous set of articles).
The steps we didn’t have to adhere to as a result of having no freeholder were those of serving the claim notice and the right of access notice, and any management contract notices etc. Nor did we have to be concerned about rejected claims and unspent service charge monies and we also had no freeholder voting rights to concern us either.