# Under the MUD Act can the directors of a Management Limited Co. be forced to resign?



## rubberband (28 Nov 2011)

hi could anyone please answer my question....

Under the Multi Unit Development Act can the directors of a Management Limited Company be forced to resign?


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## ontour (28 Nov 2011)

According to MUD a director has to resign after 3 years service.  In effect it is saying that the term of a director can not be more than three years without facing the electorate.


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## shesells (28 Nov 2011)

But they can stand for re-election after 3 years, so someone can be a director for more than 3 years.


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## 10amwalker (28 Nov 2011)

Hi Rubberband,

Sorry although the question is a simple one the answer is not so straightforward.

Firstly, are the current directors the original director/developer nominees or are they members of the owners management company ?

Under the MUD Act the common areas of the management company are transferred by the developer who was holding them in trust for the OMC however when this transfer or vesting takes place the developer generally has no other interest and will allow other members of the OMC to become Directors.
This transfer of the common areas had a deadline of the 30th September 2011 but not that many newish OMC's have vesting take place. When I say newish I mean those build since 2000.

Would you be able to elaborate somewhat and provide us with some more information so that we can assist or advise you.

The forcing of Developer Directors to resign tends to be the aim for the OMC as this allows the membership of the OMC to elect owner members who would like the opportunity of having a say in the running of their OMC which directly affects their living environment.

Have a look at [broken link removed] 

Ontour- in relation to the 3 year rule of serving as a director. This provision was put into the Act to safe guard against directors being there for life. A director if a life director can only be there for 3 years and then must go for election at the next AGM. Seemingly there are some memo and articles of association for OMC's that allowed for directors for life. This in my opinion is not good corporate governance.

Hope that helps. It is a very complex topic and to provide a comprehensive worthwhile answer we do need more info.


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## rubberband (29 Nov 2011)

YES, they are the current directors who are the original director/developer nominees. i understand that from april 1st the directors of a management company have a 3 yr term max if appointed at an agm but our management company is a limited company and no solicitor or legal representative has been able to answer my question, can they be forced to resign????


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## capnhand (29 Nov 2011)

Yes.

They can be forced to resign at the AGM of the company when they are going for election by a majority vote. 

They can also be removed as directors provided proper procedures are followed eg. extended notice is given to the directors who are going to be removed etc.

Note that the MUD act automatically makes it one member one vote. Previously it was the case that not all the residents were entitled to be members of the management company.

Regards

capnhand


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## onq (29 Nov 2011)

You seem very concerned with getting rid of the developer directors, is this the case?
I think its less of a case of "forced to resign" and more of a case of "failing to get re-elected".

Often they are a fund of knowledge on the building, its problems and how these were resolved including matters of wayleaves, easements and rights of way.
All of the latter should be your concern with the measures in relation to the extinguishment of easements coming into play next year under the Land Conveyancing Law Reform Act.
If I had a primary source of information I'd be begging them to stay and hoping to persuade them to bear the cost of formally registering any easements before handover or soon after.


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## lantus (29 Nov 2011)

you cannot 'force' a director to resign. There are several options.

1/ Ask current directors to appoint new directors and then resign themselves.) Directors can appoint new directors at any time.

2/ If an AGM is imminent give notice that persons will be standing for election as directors. At an AGM directors typically are automaticlly resigned and then must be re-elected (check your articles of association.)

3/ Hold and organise an EGM (with or without directors being present) and elect your own directors up to maximum allowed. You may well need a very large amount of people to do this, possibly 51% of all the members. If your estate is made up of several hundred houses then good luck.

The maximum amount o directors you can have is the number the company started with. The min is 2 at all times. So if there are only 2 directors then one must resign before one more can be added. Once you have control you can change your company articles to have more directors.

The easiest way is at an AGM. You can make a proposal and if enough members vote your way then great. (typically its 3 members required to be an official meeting so less stress there.)

If no AGM is forthcoming contact the ODCE who will enforce one.

The developer will probably have a financial incentive to keep control of the OMC unless it's all finshed and sold so unless this has happened expect a fight on your hands.)


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## shesells (29 Nov 2011)

lantus said:


> The maximum amount o directors you can have is the number the company started with. The min is 2 at all times. So if there are only 2 directors then one must resign before one more can be added. Once you have control you can change your company articles to have more directors.
> 
> The easiest way is at an AGM. You can make a proposal and if enough members vote your way then great. (typically its 3 members required to be an official meeting so less stress there.)



All depends on your articles of association. Ours allow for as many directors as there are members. Also our quorum is just two members not three.


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## capnhand (30 Nov 2011)

A directors can be "removed" from office under S182 Companies Act 1963 by an ordinary resolution of the shareholders at an agm. PROVIDED extended notice notice of 28 days is given under Sec 142 Companies Act 1963 to the company at its registered office stating the nature of the resolution to be moved.

If there is no AGM due then an egm can be requisitioned by 10% of the shareholders of the company. If the directors do not convene an egm, then if more then half the members wish to have an egm then can convene one themselves under s132 CA 1963. Again proper procedures are vital.

capnhand


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## rubberband (30 Nov 2011)

the director/developer of which (husband and wife are directors) of our apartment block at the last agm 2011 resigned as directors which was normal but the wife was reappointed by the husband and seconded by their solicitor who is not an apartment owner in our block and the husband also was reappointed as the other director by his wife and seconded by his solicitor.

surely this cannot be legal?

the suggestions above i welcome very much and is there something that can be done now or do we have to wait till a month before our next agm 2012 to give 28 days notice and send it via registered post to the directors address to remove them as directors, so that finally we can get the members/owners voted on as directors??


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## lantus (1 Dec 2011)

rubberband said:


> the director/developer of which (husband and wife are directors) of our apartment block at the last agm 2011 resigned as directors which was normal but the wife was reappointed by the husband and seconded by their solicitor who is not an apartment owner in our block and the husband also was reappointed as the other director by his wife and seconded by his solicitor.
> 
> surely this cannot be legal?
> 
> the suggestions above i welcome very much and is there something that can be done now or do we have to wait till a month before our next agm 2012 to give 28 days notice and send it via registered post to the directors address to remove them as directors, so that finally we can get the members/owners voted on as directors??


 
The solicitor will be a member. When the company is set up and no units have been sold it's usual for people like this to become members so the company has a structure. A company limited by guarantee needs 7 members. They have voting rights during the developer and devloper/owner stage until the final owner only stage whne they can be removed.

In relation to re-appointment you need to check your articles but standard docs would say any director that retires and then offers themselves for re-appointment is deemed to of been reappointed unless a resolution is put forward and the matter put to a vote.  Basically you should of requested a resolution on the re-appointment of the directors which would of required a vote. If there were enough people there on your side you could of prevented them being re-elected.

In that situtation however you either would have to be recommended by the outgoing directors to be appointed as a director at the meeting there and then or of already of given the 21 day notice.

So yes, as no one said anything it's legal.

Your best bet is to try to form a +ve relationship with the developer and get additional members added as directors as part of a gradual exchange. If they wont do this (and they may have a financial incentive for you not to.) then your best bet is either wait for the next AGM or hold an EGM in the interim. learn all the procedures. send stuff registered post as well to the co. office.


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## capnhand (1 Dec 2011)

Hi

As Iantus says the best senario is if you can form a relationship with the previous developer and for him/her to step down. They are possibly not aware of the changes that the MUD has made to their position. After all it has only just come into force.

There should not be any incentive for him to stay on as a director now as the main reason ie he does not want to allow the transfer of the common areas to the management company is no longer an option for him. 

If the director/developer does not engage with you or stonewalls I believe you can take him/her to the circuit court who will then direct the parties to meet, discuss and settle the matter via mediation.

Kind Regards

capnhand


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## lantus (2 Dec 2011)

capnhand said:


> There should not be any incentive for him to stay on as a director now as the main reason ie he does not want to allow the transfer of the common areas to the management company is no longer an option for him.
> 
> If the director/developer does not engage with you or stonewalls I believe you can take him/her to the circuit court who will then direct the parties to meet, discuss and settle the matter via mediation.
> 
> ...


 
Unfortuantley there can still be an incentive for a developer to retain control of the OMC. In a word, MONEY!

The budgetary affairs of an OMC are generally of little concern to residents and aside from what they pay they are generally uninterested in the details. The developer may well be generating budgets that allow for some profit on key areas if he can secure those services at a more competative rate. Our developer has done this to great success over many years because we never questioned anything. (not saying they are all like this!)

Unless you have all the financial records and working books including bank account details and all amounts received and paid then it is very hard to say what money has changed hands.

The records our developer provided to the CRO dont resemble anyhting like the amounts in the budgets. The key amounts that were paid to people like landscapers are very small numbers in comparison. They seem to be able to get away with it quite easily as well. shame.


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## merloo (10 Dec 2011)

Why would the developer not want the common areas transferred to the management company? Does this not absolve him of all responsibility?


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