Successfully forming a Right to Manage (RTM) company is just the beginning of your Right To Manage journey.
Being a Director of a Right To Manage company has a number of roles and responsibilities, which we’ll detail in this blog. It is recommended that for the day-to-day management of the block you employ the services of a professional managing agent to ensure compliance and the smooth operation of your block.
As a Director of a Right To Manage company, you will be responsible for the following but if you appoint a professional managing agent, they will deal with most of this on your behalf.
If you’re now a company director you have a lot of responsibility on your shoulders. This could even be on top of a full-time job. This is why it’s so important to understand what is needed of you.
If you feel that you can’t handle this work load, or need a bit of support, consider hiring a managing agent to help.
There are some key actions that will be expected of you as a director throughout the RTM process:
- Sending invites to all leaseholders to join the RTM company.
- Demanding, collecting and recovery of service charges in accordance with legislation and the terms of the lease.
- Dealing with lease enquiries and complaints.
- Exploring, reviewing and entering into service agreements
- Paying of contractors, site staff and other services/suppliers
- Placing of comprehensive buildings insurance /directors and officer’s liability
- Health & Safety inspections/assessments
- Asbestos management plans
- Submitting 5-10-year maintenance plans and reserve fund management
You will also need to ensure all your accounts are in order. Again, a managing agent can do the accounting duties on your behalf:
- Create budgets, income and expenditure reports for shareholders.
- Filing of annual company accounts to Companies House.
- Carrying out section 20 process where necessary for major works and long-term agreements
- Ensure continued maintenance of common parts including gardens, drive ways and garages, roofs, car parks and electrical equipment
- Enforcing the terms of the lease. This will now often be against your neighbours.
- Employment and management of site staff
- Attending/holding directors’ meetings and AGM as detailed in the Articles of Association.
The legal obligations of a Director
The legal obligations of Directors have been established through statutes, regulations and case law.
We can break these down into three key areas:
Duty of Care and Skill
Common law duty requires Directors to act with ‘the care an ordinary man would take in the same circumstances on his own behalf’ and with the skill expected from someone with their ‘particular knowledge and experience’.
Directors must act honestly, in good faith and in the best interest of the company. They must ensure that they do not have any conflict of interest, and make it known if they do.
There are a few statutes that affect the conduct of Directors and Officers.
You’ll need to be aware of the:
- Companies Act 2006
- Environmental Protection Act 1990
- Health and Safety at Work Act 1974.
It doesn’t matter if the Director is remunerated or not. These responsibilities apply regardless.
The following duties also need to be adhered to.
A duty to exercise their powers for their proper purpose
Ensure you are always acting within your powers. You’ll also need to check if there are any limitations on what a director can or cannot do.
A duty to exercise independent judgment
It is important that you not influenced by others and arrive at you on conclusions.
Neighbourly issues are likely to arise from time to time. You need to ensure your decisions are not influenced by your personal opinions. i.e. if one of these neighbours is your friend.
A duty to exercise reasonable care, skill and diligence
It is important to make sure that decisions are considered carefully and properly. Where uncertainties arise, seek professional advice.
A duty to avoid conflicts of interests
Avoid putting yourself into a situation where interests conflict with those of the company. For example, if you need a plumber, you cannot suggest a friend or family members plumbing business.
The articles of association should lay out how to deal with Directors’ conflicts of interests.
A duty not to accept a benefit from a third party
Directors should carefully consider any offers of company hospitality. For example, if a builder is engaged in exchange for offering his services to a Director personally.
A duty to declare an interest in a proposed transaction or arrangement with the company
Directors must declare both the nature and extent of their interest to the other Directors.
The Company Secretary’s duties
Now the second most important role within any RTM company is the company secretary. This role should never be underestimated or forgotten. Company Secretary’s play a vital role in keeping Directors up to date with the day to day running of the company.
This allows for Directors to fully focus on running the business. Whilst the company secretary acts as chief administrative officer. They don’t have to be a Director, but they do share some legal responsibilities.
Typical company secretarial duties include:
- Dealing and managing changes of Directors
- Keeping the register of Directors, members and shareholders up to date.
- Creating copies of any resolutions and agreements and sending these to Companies House.
- Ensure the company’s name plaque is displayed at the registered office address.
- Providing any information requested or required to statutory authorities.
- Taking custody of, and using, the company seal.
- Issuing new or replacement share certificates.
- Filing the Annual Return.
- Filing the Annual Accounts.
Is there an easier way?
So, as you can see, and are probably now aware, there is a lot of responsibility and several duties included with running an RTM company.
If you feel like you need a bit of support, one option you have is to speak to a managing agent. This will put the management responsibilities into their hands.
A professional block management firm can take on a load of the required work to help your RTM company.
This means that the leaseholders still essentially have ultimate control over how their block is run. However, all the hassle of taking on the responsibilities of Directorships or company secretary positions is essentially gone.
If that sounds like something of interest to you get in touch with us today to find out how Scanlans can support you.