Becoming a director of a limited by guarantee company

[dam099]

Re: Becoming a director on a limited by guarantee company

Afraid not. It is you the shareholders who appoint the directors.

Thats not always the case. Often the builders retain effective control of management companies in the intial period until all units are sold it could have been during this time that the company was allowed to get into a mess and then when the owners finally do get control they are left with the legacy of this mess.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Afraid not. It is you the shareholders who appoint the directors. It is you the shareholders who gets the benefit of the company. You have signed contracts with the benefit of legal advice stating that you will pay whatever contributions are due. Now it is time to pay up. If you feel the directors have acted recklessly take a case. If you feel the solicitor should have advised you better speak to the law society. If you feel the law is wrong speak to your TD and ask for it to be changed. If you feel you can fix it hold an EGM and get new directors appointed (I wish you luck!!!!).

We never appointed any directors. The builder has retained one unit so still controls the management company. The company is insolvent but if we report this our investments could become worthless. Anyone volunteering to be a director of this company would be crazy but how else can we do something?

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

We never appointed any directors. The builder has retained one unit so still controls the management company. The company is insolvent but if we report this our investments could become worthless. Anyone volunteering to be a director of this company would be crazy but how else can we do something?

The builders may currently have effective management control, but the shareholders appoint the directors. The directors in turn control the management of the company. I'd advise you to find out what mechanisms are there to enable new directors to be apointed. If the appointment of new directors is in someway blocked to you then the solicitor who acted for you on purchase of the appartment should probably be taken out and shot (as you then own something you can be blocked from controlling in any way).

Also, how could the fact the company being insolvent make your investments (by which I presume you mean the properties themselves) worthless? The liability of the company is limited, hence the name.

Anyone volunteering would certainly be faced with a lot of time, trouble and grief sorting out the mess, but as I pointed out before will not be personally liable for anything unless they act improperly. If one or more of the people who are currently directly affected by the problems aren't prepared to do this, then who else would you suggest this might be?

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

The builders may currently have effective management control, but the shareholders appoint the directors. The directors in turn control the management of the company. I'd advise you to find out what mechanisms are there to enable new directors to be apointed. If the appointment of new directors is in someway blocked to you then the solicitor who acted for you on purchase of the appartment should probably be taken out and shot (as you then own something you can be blocked from controlling in any way).

Also, how could the fact the company being insolvent make your investments (by which I presume you mean the properties themselves) worthless? The liability of the company is limited, hence the name.

Anyone volunteering would certainly be faced with a lot of time, trouble and grief sorting out the mess, but as I pointed out before will not be personally liable for anything unless they act improperly. If one or more of the people who are currently directly affected by the problems aren't prepared to do this, then who else would you suggest this might be?

Until the last unit in the complex is sold the builder controls 51% of the management company so he calls the shots.
If a management company folds, apartments cannot be sold so they are in effect worthless.
If you become a director of a company which is insolvent and continue to trade you are immediately guilty of reckless trading and could face disqualification and other such delightful sanctions.
At this stage I'd settle for the easter bunny...

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

Until the last unit in the complex is sold the builder controls 51% of the management company so he calls the shots....

And if it's never sold (i.e. builder holds on to it)? If you're saying no new directors can be appointed until the last unit is sold, the builder has an effective block. See my previous comment about poor legal advice.

If a management company folds, apartments cannot be sold so they are in effect worthless.

And they can be sold with no problems if it's insolvent, as you say it currently is?

If you become a director of a company which is insolvent and continue to trade you are immediately guilty of reckless trading and could face disqualification and other such delightful sanctions.

Not true, as far as I know. Just make sure you don't take on any new liabilities subsequent to your appointment. If your fellow directors ignore this and press on regardless, then time to report them.

I'm just repeating points previously made at this point, so I'll bow out.

Best of luck!

 

[ODCE]

Re: Becoming a director on a limited by guarantee company

The Office of the Director of Corporate Enforcement (www.odce.ie) wishes to clarify the statement in Post #13 above that “[the ODCE’s role] does not extend to dealing with complaints from the public about individual [management] companies. They will process statutory reports from Revenue, auditors or certain State agencies but not complaints or queries from the public.”

The ODCE has always welcomed public complaints about suspected breaches of company law duty or obligation. Examples of issues which we deal with include the failure of companies and directors to prepare audited financial statements, to convene annual general meetings and to maintain a register of the company’s members. In fact, we receive some 300 public complaints annually in relation to all types of companies. A copy of our Complaint Form can be downloaded from www.odce.ie/en/forms_complaints.aspx.

However, we usually have no responsibility for issues such as the level of service charges, the adequacy of the services provided by a management company, the terms on which the company chooses to retain its Managing Agent, delays in the transfer of common areas from a developer to the company, etc., because these problems do not ordinarily derive from company law. They are founded mainly in property law and contract, and possible solutions to these problems will lie in these areas.

All of the above issues (and more) are explored in detail in the Consultation Paper which we published last December entitled “Draft ODCE Guidance on the Governance of Apartment Owners’ Management Companies (AOMCs)” whose purpose is to improve the performance of management companies. Further information in relation to this Paper is available on the homepage of www.odce.ie. We are looking for views on the content of our Draft Guidance by 30 April 2007.

Finally, the Law Reform Commission has published a separate Consultation Paper on Multi-Unit Developments dealing with possible legal changes in this area. They are also seeking views by 30 April on their Paper. Further details are available at www.lawreform.ie.

Office of the Director of Corporate Enforcement

5 April 2007

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

The Office of the Director of Corporate Enforcement (www.odce.ie) wishes to clarify the statement in Post #13 above that “[the ODCE’s role] does not extend to dealing with complaints from the public about individual [management] companies.

My statement above did NOT refer to a management company.

I stand over my statement as follows:

I know people who have contacted the ODCE to report companies who have breached company law and diddled people in the process. The ODCE have told them that their role does not extend to dealing with complaints from the public about individual companies.

I refer in particular to one case where there was prima-facie evidence based on documents lodged in the Companies Office (and therefore in the public domain) of serious breaches of company law by an insolvent company with a high public profile. The ODCE refused to do anything about this when contacted by a member of the public (who was owed a significant sum is outstanding trade debt by the company in question) and said "we are not a debt collection agency or facilitator" as their grounds for this stance. They did say that they would process a written complaint from this person but would otherwise would not act on the legal breaches notified to them. The person who made the call declined to make a written complaint on the basis that this would reduce from slim to zero their chances of ever getting paid by the offending company.

It beggars belief that other agencies such as the Garda Siochana or Revenue would refuse to handle a call notifying them of evidence of criminal wrongdoing until and unless the complaint was made in writing.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

There's a big difference between a dispute over an invoice and having proof a company is insolvent. If there was proof of insolvency (and being owed money doesn't prove this) I would be surprised if the ODCE didn't take action. As they said though, they're not a debt collection agency.

I also don't see anything wrong about them asking for written statements. In fact, anything that has potential to end up in the courts (as a winding up of company for example) would need this. The fact that the complainant wouldn't make such a written complaint is another reason why the ODCE probably sees no reason to act.

I'd imagine the Garda or Revenue would act in exactly the same way when faced with a civil dispute.

Unless there's more than an unpaid invoice, the best advice would be to get a solicitor onto it. I was in a similar situation last year (with a well known company as it happens). After initially ignoring legal proceedings they eventually paid up.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

There's a big difference between a dispute over an invoice and having proof a company is insolvent. If there was proof of insolvency (and being owed money doesn't prove this) I would be surprised if the ODCE didn't take action. As they said though, they're not a debt collection agency.

I also don't see anything wrong about them asking for written statements. In fact, anything that has potential to end up in the courts (as a winding up of company for example) would need this. The fact that the complainant wouldn't make such a written complaint is another reason why the ODCE probably sees no reason to act.

I'd imagine the Garda or Revenue would act in exactly the same way when faced with a civil dispute.

Unless there's more than an unpaid invoice, the best advice would be to get a solicitor onto it. I was in a similar situation last year (with a well known company as it happens). After initially ignoring legal proceedings they eventually paid up.

The complaint did not refer to a civil dispute but to evidence of serious & criminal company law breaches by a prominent company. This evidence was already in written form on documents filed by that company in the CRO and therefore was easily accessible to the ODCE and the public via the internet.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

Apologies if I got it wrong about the nature of the complaint - it sounded like someone that just hadn't been paid having a go at the company that owed them.

Having said that, I would imagine the ODCE have enough on their plate dealing with complints formally lodged with them (i.e. in writing) without proactively starting investigations based on heresay. I don't think it an unreasonable position for them to adopt.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

Again, this was not based on hearsay but on documents lodged with the CRO that clearly indicated criminal breaches of the Companies Acts.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

I used the term "hearsay" in the sense of someone stating something that they weren't prepared to stand over, which is what seems be the case here.

Maybe if you elaborated on the nature of the breaches what you say would make more sense. I doubt these documents state explicitley "Hands up, we're breaking the law". If someone has evidence that the information they contain is somehow inacurate, but is unwilling to make a written complaint, then as I said, I'm sure the ODCE have better things to be doing with their time.

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

Maybe if you elaborated on the nature of the breaches what you say would make more sense.

Unfortunately I cannot do so as the specific information in question was divulged to me by a client in the course of my work and there may be a possibility of breaking ethical/confidentiality codes if I divulge these specifics here.

I doubt these documents state explicitley "Hands up, we're breaking the law".

They do, in fact. The breach of law is clearly indicated on a set of company accounts and accompanying B1 return filed with the CRO.

 

[room305]

KalEl, if you took up a position of director you could always insist on only doing so if the management company purchases "Directors and Officers Liability" insurance. In the event of a legal action against you personally (say for trading recklessly, late filing of accounts etc.) you would be covered by the insurance policy usually up to a certain monetary threshold (e.g. €1M). They usually include payment of legal expenses and the like as well.

Perhaps not ideal but it would afford some measure of protection.