RIGHT TO MANAGE WhAt diRectoRsneedtoknoW


RTMcompanies aregovernedbycompanylaw butwhatdoesthismeanforRMCs? A Right toMAnAge Company is


set up, like any other company in accordance with certain rules and regulations.Under these rules, directors have duties that theymust adhere to as outlined by TheCompanies Act2006.The Actlists thesedutiesas follows:


nTo act within the powers of the company–adirectormustact in accordance with the company’s constitution(i.e. theArticlesof


Association) and exercise his powers for the proper purpose.


nTo promote the success of the company–adirectormustact in good faith in theway he considers promotesthe successofthe company for the benefit of its shareholders as awhole. If the company is not run for the benefit of itsmembers (e.g. a charitablecompany)thenpromotion is forthe benefit of thecompany’s purposes.


nTo exercise independent judgement - this judgement or discretion can be limited if this is in accordance with the company’sconstitution.


nTo avoid conflicts of interest – a directormustavoid situations inwhich he has a direct or indirect interest that conflicts with ormayconflictwith the company’s interests.However, there are limited situationswhere such conflicts canbeexemptedor authorised orwhere the constitution/ Articles of Association allowtheBoard to authorise such situations.


nNot to accept benefits fromthird parties – a directormust not accept any benefit (including a bribe) froma third partywhichisgiven because he is a director or because he does oromits to do anything as a director.


nTo declare any interest in proposed transactions or arrangements with the company – a directormust declare the nature and extent of anyinterest (director indirect) in a proposed


transactionorarrangement with the company (the


directorneed notbeaparty to the transaction for this duty to apply).


nTo exercise reasonable care, skill and diligence – a directormust exercise the care, skill and diligence whichwould be exercised by a reasonably diligent person both with the general knowledge, skill and experience thatmay be reasonably expected of a


person carrying out the functions undertaken by the director in relation to the company.


54


DirectorsDuties nAll current directors shouldmake it their business to ensure that they areaware of their duties under the Companies Act 2006 (see above). nOnappointment, newdirectors should receive guidance on these duties.


nAdirector should have a service agreementwhichshouldspecifically refer to compliance with the duties. nCompaniesshouldreviewtheir internal policies in the light of thenewdutiese.g.HR, business sector compliance and corporate responsibility.


nDecisionsmade at board level or at committee level should be supported by background information and thoroughly considered.


nThere should be written evidence of the reasons for decisionsmade.


nAny minutes formeetings should be detailed and should clearly set out the evidence considered and produced. nForacompany withasolemember whoisalsothe sole director,written resolutions and evidence should still be produced. Any contract between the company and a sole directormust be recorded in writing.


nManagement and project teams reporting to directors should prepare briefing notes and reports taking into consideration the dutieswhich the directors are required to consider.


This isasummaryofalonger article first published in Flat Living, issue 7


acourt.The prescribed form forthe Notice of Claim is set out in the Statutory Instrument (2010No825)and aformcan be downloaded fromthewebsite atwww.legislation.gov.uk. LEASEexplainsthatitisthe Notice of


Claimwhich brings the exercise of the right tomanage into beingand setsthe date forthe RTMcompany to take over themanagement. In beingabletoset theirowndate,the members of the RTMcompany are in a position to plan aheadand to preparefor thetransfer. While the legislation provides a minimum period of threemonths (fourmonths in total fromtheservice of theclaim,inorder to allowfor the opportunity to serve a counter- notice)thisneed notnecessarily be taken asamaximum;itmay be prudent in some circumstances to provide alongerperiodin order to engage anewmanaging agentand to putother arrangements in placetoensurethat thetransferofthemanagement function is as seamless as possible. The next step is for the landlord to serve a


counter-notice,nolater than thedatespecified by theRTMcompanyinthe Notice of Claim The counter-notice can do one of two things:


TheNoticeof Claim... brings theexercise of theright tomanage into being


either agreetothe RTMorallegereasonswhy theRTMcompanyisnot entitled to proceed. If thelandlord agrees,themanagement will


pass to the RTMcompany on the date specified in theNoticeofClaim.Where thelandlord does notserve acounter-notice, then the acquisitiondatefor theright will be thedate specified in the notice. Where thelandlord disputes theclaim,the


grounds for dispute are limited to three issues: nthebuilding does notqualify; ntheRTMcompanydoesnot comply with the


legislative requirements; or nthemembers of theRTMcompanydonot


represent half the flats in the building. Thecounter-noticemustspecifythe reason for thealleged non-qualificationandmust state


that: nthe RTMcompanymay apply to the LeaseholdValuation Tribunal fora


determination of the issue; ntheRTMcompanywillnot acquirethe right unless theLVT determines in favour of the company or the landlord subsequently agrees. TheRTMcompanymustmakeanapplication


to the LVT within twomonths of the date of the landlord’s counter-notice. If the application is notmade within this time,the claimis considered withdrawn. Thereisnoprescribed formforthisbut an applicationform, with explanatory notes, is available fromthe LVT.●


ForamoredetailedexplanationoftheRTMprocessand alistofleasehold specialistsgototheLEASEwebsite at: www.leasehold-advice.org. For a list ofALEP-approved specialists, goto www.alep.org.uk


Summer 2012 Flat Living


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