Advice needed about company director

[Winchester100]

Hello.

I need some advice please.

I own a leasehold property. The freehold is held jointly by 20 individual owners.

Maintenance of the building is arranged via a management company of which all 20 property owners are also shareholders. Every shareholder pays annual ‘management fees’ into a company bank account for maintenance purposes.

The limited company has one director and 20 shareholders. The director has no financial interest in the building and, although he used to own one of the properties, he sold it many years ago.

To cut a long story short, the director has been setting up contracts with his own maintenance company, so effectively he’s commissioned himself to carry work out, signed the contracts as the company director and also signed them as the contractor.

He has never consulted with shareholders, who have never had sight of these contracts. He has determined his own fees without consulting or benchmarking. Shareholders have dutifully paid whatever he said the fee was.

Some of the things he’s contracted his company for include things that would not usually be the role of a building management company (for example, preparing company accounts to submit to accountant).

to make matters worse, he has contracted himself to carry out maintenance work out, and then completely failed to do any of the work in the contract.

Annual management fees are more than three times the cost of fees in a neighbouring building, which is managed by a professional management company. I should add that the neighbouring property is in a good state of repair,

The alarm was raised when our building began to fall into serious disrepair despite this director contracting himself to carry out maintenance. There is no record of anything he’s done in the last 12 months. He is supposed to carry out regular inspections, there is no evidence of this. He basically appears to be draining the company bank account and failing to provide contracted services, despite contracting himself and without any scrutiny.

Where do we begin wit this legally?

thanks

There must be an AGM where the shareholders can vote him out. From the sounds of it, the new director(s) will then be able to take action against his company for breach of contract. The shareholders may also have a claim against him personally, but you would need to take legal advice before going down that route.

Our one says only leaseholders /shareholders can be directors.

The shareholders can vote him out (5% can call a meeting for shareholders and all vote him out)

Then get a paid for management company to run it for you (if 20 flats). They can probably manage the whole removal for you too.

Thanks for you replies. What do you mean by ‘the whole removal?’

getting rid of the bad director.

Ah!

Call a shareholders meeting and remove him. Also, check what the articles / shareholder agreement says about directors cobflict of interest.

I used to be a resident director of a management company and this kind of thing is common. In the few years I was doing it, we had five attempts by people who had bought a property in the development, created a managing agent, then attempted to get themselves elected as a director so they could oust the existing managing agent in favour of their own company.

It’s a goldmine for them because they can rake in everyone’s annual fees, then do nothing. The majority of residents will not have the knowledge, will, time or money to get rid of them so they get away with it.

i think that’s exactly what has happened

I would suggest that you speak to other residents and get support for voting them out as a director at the next AGM. You’ll then need to find and agree a new managing agent though and I don’t know enough about doing that to advise I’m afraid.

In my experience, it’s very difficult to deal with these kind of situations. Most residents are too apathetic to bother even turning up for AGMs but are happy to moan about charges and how things are run. They’re even less willing to be involved in helping run them. I was a resident director for several years and it’s a thankless task.

You only need 50% of votes to get a director out.

So if most don't care, the voters win.
The director can't vote as he isn't a shareholder (how is he even a director?)

I asked other blocks/local gardeners who ran their management company and then I used that company. A quick google will throw up sone local companies and I think most are registered with sone organisation.

Thank you for your replies

You don't have to wait for the AGM.

You can require the company to hold an EGM (extraordinary general meeting).

You just need holders of 5% of the voting shares to request it of the company - and as there are 20 shareholders I presume you hold 5% yourself.

You will want to propose that the director be removed and that a new named director (you?) be appointed.

Follow the procedure set out here https://www.companylawclub.co.uk/calling-general-meetings.

I'd also check your lease as that should say who can be a director. And it's normally only leaseholders.

Thanks guys

If you want to check the incorporation documents of the company, which should set out who can be a director, Google “Companies House” and you can search the name of the company and then download them for free.

by looking at these you should be able to see any restrictions on who can be a director, and any set procedures for removal etc. the information already provided is based on standard table A articles which most companies of this sort would use.

if you’d like me to have a quick read through and give you any pointers, let me know (I’d need the company name)