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Company formation

• Power for the company to deal with all usual management activities (e.g. maintenance and insurance) and also specific powers to maintain paths, roads, access-ways, grounds and landscaping and to arrange services and amenities.

• If required, and it is a new development, a power to allow the developer of the property to retain voting control of the company until all the dwellings or units are sold. Once all units are sold, the developer ceases to be a member of the company.

• The articles also provide that only a lessee or freeholder may be a member. Whenever a unit is sold, the purchaser becomes a member of the company in place of the person who has sold their unit.


The limited company is an artificial legal entity in the sense that it has no power to fulfil its functions itself. Somebody must therefore represent the company and carry out its functions. It is this function which directors perform, either individually or collectively. Private companies generally restrict ownership of the company to a

limited class of persons and all flat management companies are likely to fall into this category. Flat management companies are advised that more than one director should be appointed so that a ‘committee decision’ on matters relating to the company may be reached. It also provides some protection against one director taking risks with the company funds. The company is managed by the directors who may exercise all powers

of the company. It will clearly fall to the directors of the flat management company to assume responsibility on behalf of all flat-owners to ensure proper management of the property and to carry out the wishes of the majority of members expressed at members’ meetings. Directors are obliged to exercise their duties to promote the success of

the company upon whose behalf they act and to comply with all statutory requirements. Due to the administrative and non-trading nature of a flat management company, it is not often that the directors will have cause to be overly concerned by the majority of statutory requirements. No remuneration is usually allowed for management company

directors but provisions may be made for expenses to be paid in certain circumstances if the members consider it appropriate. In allocating directors’ duties, it is possible to delegate specific areas to

sub-committees, if you have a larger block of flats, to ease the workload of a particular director.

Common administrative requirements include:- • insurance • maintenance and repairs • banking • rent and service charge collection • preparation of annual budget estimates • maintenance of books of account • annual accounts • security of property, and • keeping flat-owners informed.


Once the building is owned by the flat management company, the main structure of the property will usually become its responsibility. This includes the foundations, external walls, joists, roof and other supporting structures and all the common parts, such as staircases, lifts, hall and main access-ways, gardens or yards and driveways. The director with responsibility for these matters will sometimes find this task onerous since the cost of maintenance and repairs features high in the list of costs which he flat-owners will ultimately have to share. The directors dealing with maintenance and repairs will need to liaise

with the directors involved with insurance and with the person whose job it is to prepare annual expenditure estimates.


It is important to remember that as a director, a flat-owner is liable to penalties both financial and otherwise. Failure to file an annual return or completing it improperly may result in a fine. Directors may also be disqualified from acting as a director in certain cases where there is persistent default in submitting documents.


Here is a check-list of those items which should always be uppermost in a director’s mind: • File changes of details of officers • Keep the statutory books up to date at all times • Ensure statutory accounts are prepared within the time-limits • File annual returns on time • Diarise critical dates for dealing with important company matters • Have good professional advisers to hand • Keep all flat-owners informed of any major item of importance • Keep legal documents such as leases and the other title documents in a secure place

• Understand the provisions of the leases • Do not permit individual flat-owners to delay payment of monies owing by them for too long

There may be a perception that the duties for directors of a residents’

management company are less onerous than if it were a trading company. The responsibility is great and directors may benefit from taking advice on their position. Such companies are the foundation to the good management of

residential blocks – directors who take their responsibilities seriously are the mortar that holds it together..

Karen Howell Bowley Company formation executive Jordans Limited

For further information please contact: Carol Prince, Commercial Manager, Jordans Limited Tel: 0117 918 1284 or email: or visit

Company formation and your insurer

Most Insurers will provide Directors & Officers Liability Insurance policies whether or not they are incorporated and whether they are registered at Companies House as a Private Limited Company (for profit) or a Company Limited by Guarantee (not for profit). Although the pricing of policies does not change regardless of

how they have registered, the cover offered however, usually does. An association that has been entered as not for profit will benefit from the inclusion of fidelity cover along with loss of documents

cover. Fidelity cover protects the Insured from theft of money, or other property belonging to it, by an employee. Loss of documents cover will pay the cost of reconstituting, restoring or replacing documents (including electronic computer system records) belonging to or under the care custody or control of the Insured. Also, if a company wishes to extend its policy to include

its own liabilities (corporate liability or organisational cover), then a company registered as not for profit also benefits from professional indemnity.


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