Becoming a director of a limited by guarantee company

[ang1170]

Re: Becoming a director on a limited by guarantee company

You're way off the mark here.
These companies are a special case...and normal rules cannot apply.

No they're not (a special case)! They're either companies, and play by the rules, or they're not. It never ceases to amaze me in this country that when laws start getting enforced, people claim they don't apply, they're special cases, sure everyone's doing it, whatever....

You do have my sympathy, however. Your problem is with your directors: you either need to replace them or get some legal advice on bringing an action against them for not acting in members interests and failing in their duties. Not ideal I know, but that's the situation.

The real solution is I think to come up with some other (legal) mechanism for running management companies. For now though, you have to expect to follow the rules like everyone else.

I used to live in an apartment complex and couldn't believe the apathy surrounding the whole management company issue. People would complain OK if you spoke with them, but they took zero interest in getting involved in any form. Am I glad I moved on....

 

[ClubMan]

Re: Becoming a director on a limited by guarantee company

I used to live in an apartment complex and couldn't believe the apathy surrounding the whole management company issue. People would complain OK if you spoke with them, but they took zero interest in getting involved in any form. Am I glad I moved on....

As far as I can see it's more often antipathy rather than apathy with housholders taking a them and us approach to the management company and not understanding (or want to understand) that they are the management company in most cases!

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

No they're not (a special case)! They're either companies, and play by the rules, or they're not. It never ceases to amaze me in this country that when laws start getting enforced, people claim they don't apply, they're special cases, sure everyone's doing it, whatever....

You do have my sympathy, however. Your problem is with your director

It's a minefield alright...and you're right companies need to play by the rules. However, there's a major problem when shareholders with hundreds of thousands invested in residential schemes are powerless and at the whim of builders who remain as directors of management companies.
Apathy is not my problem...I would happily step forward as a director and do my best to rescue the situation provided I could not be held liable for matters out of my control. I don't think this is unreasonable.
The solution I feel is vigorous enforcement of directors responsibilities directed towards these builders, and allowing residents sit as directors without the traditional burdens.
As it is now, those who want to work constructively can't and those who can won't or are too dishonest/incapable/apathetic!

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

I'm no legal expert, but I believe if you were to become a director I can't see how you'd be held liable for anything that happened pre-dating your apointment. Also, if you act in member's interests once apointed, I think it extremely unlikely you'd be held personally liable for anything (check out the recent Eddy Hobbs case). It's really a legal question though. You should also check to see how directors can be removed. In fact, that would be my starting point: get rid of them if you can.

I think the apathy I mentioned is as a result of people not realising they're actually the company: most people seem to assume that the agents apointed are the "management company". Don't get me started on management agents though.....

 

[dam099]

Re: Becoming a director on a limited by guarantee company

I'm no legal expert, but I believe if you were to become a director I can't see how you'd be held liable for anything that happened pre-dating your apointment. Also, if you act in member's interests once apointed, I think it extremely unlikely you'd be held personally liable for anything (check out the recent Eddy Hobbs case). It's really a legal question though. You should also check to see how directors can be removed. In fact, that would be my starting point: get rid of them if you can.

As a previous poster suggested some maybe many management companies are technically insolvent therefore unless the new directors are able to take immediate effective remedial steps they could be in danger of being considered to be recklessly trading.

The responsible thing for a director to do when a company is insolvent and no realistic plan exists to remedy this situation may be to take steps to wind up the company which may be difficult to do in the case of a management company.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

The solution I feel is vigorous enforcement of directors responsibilities directed towards these builders, and allowing residents sit as directors without the traditional burdens.

One further thought is that I cannot see how the second part of this suggestion could be in any way workable. What you're effectively asking for is the ability to take control of something without taking any responsibility for it.

 

[simplyjoe]

Re: Becoming a director on a limited by guarantee company

Becoming a director of a company is an onerous appointment. However there should be no need for a company limited by guarantee with a turnover of €10,000 to have more of a responsibility than a company with 7.49999 million turnover. The audit exemption should be allowed or at the very least there should be a threshold, be it lower or not.

Most accountants are well on top of their work and their clients filing deadlines. If clients were to listen to their accountants and do what they tell them, in general, there would be much less problems than are now being encountered.

As regards accountants charging these companies less I feel that this is like giving to charity. Time is value. Accountants should charge in full for all their services. If they need to give to charity I feel there are many more worthwhile charities than property management companies or water schemes. Why should accountants have to pay for peoples water or property costs. If you want to give to charity I suggest Niall Mellons Township charity.

I agree that something needs to be done in this area and this thread sums up the frustration people have with the system. It is crazy that the fines are straightline and have no relationship with the size or type of company. Fine for drink driving less than €1,000. Fine for being late filing an annual return €1,240. Crazy country!!!

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

One further thought is that I cannot see how the second part of this suggestion could be in any way workable. What you're effectively asking for is the ability to take control of something without taking any responsibility for it.

As dam099 said how can you become a director of a company you know to be insolvent, trading recklessly and guilty of fraudulent preference?
Yet if you don't, the company will surely go under and render your investment untransferable and worthless. So, as shareholders we face grave consequences of bankruptcy yet we have no access to funds other than our own back pocket to seek legal advice for the company.

 

[simplyjoe]

Re: Becoming a director on a limited by guarantee company

Some responsibility has to devolve to the shareholders. How can you allow a company go this way when your home/investments are being threatened by people not doing their job? People need to wake up and take responsibility. No point always blaming someone else. You have access to courts and if a number of apartments/houses are involved hold meetings with the others.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

Some responsibility has to devolve to the shareholders. How can you allow a company go this way when your home/investments are being threatened by people not doing their job? People need to wake up and take responsibility. No point always blaming someone else. You have access to courts and if a number of apartments/houses are involved hold meetings with the others.

We are trying but it is not easy. Companies Office are not interested in whistle blowing, residents have no access to company funds and some residents are worried about flagging the issues. They think this will jeopardise their investment short-sighted and all as that is!
Builders who don't complete complexes or rape and pillage management companies should be subjected to the full vigours of company and criminal law.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

If you have hard evidence of criminal activity or of breaches of company law are you saying the relevant authorities are ignoring it?

Apart from getting legal advice (any soliicitors or barristors owners?), I'd suggest getting appointed as a director. You should be able to get full disclosure of all relevant information. As you say, regular company members have very little rights to information. With informaton you should be able to act. If you don't get it, you'll probably be forced to go down the legal route. If it's as bad as you make out, it's probably best to act sooner rather than later.

You should take advice on it, but I believe that you cannot be held personably liable for any failures prior to your appointment or if you can show you're acting in members best interests (this switches to acting in creditors best interests if the company really is insolvent).

I donlt think anyone outside is going to do much for you until you do something like that.

 

[Lyndan]

Re: Becoming a director on a limited by guarantee company

Thanks everyone for your advice, some good reading for me here.

We were told by our management agent that the developer is ready to come off as a director of the Management Company and that they would like some residents to go forward for directorship,

The said as the company was limited by gaurantee it is not the same as being a director with a non limited by guarantee company, directors can not be held personally responsible for anything and all residents are equally liable should anything go wrong...

I just wasnt sure if this was true or not!

 

[simplyjoe]

Re: Becoming a director on a limited by guarantee company

Thanks everyone for your advice, some good reading for me here.

We were told by our management agent that the developer is ready to come off as a director of the Management Company and that they would like some residents to go forward for directorship,

The said as the company was limited by gaurantee it is not the same as being a director with a non limited by guarantee company, directors can not be held personally responsible for anything and all residents are equally liable should anything go wrong...

I just wasnt sure if this was true or not!

Its not true. Directors of Limited Guarantee Companies have the same if not more responsibilities. See the 2nd post.

It will take someone brave to go in and sort it out. What you will get is your own problem will be solved and you will be a director forever as no one else will do anything. Trust me I have knowledge of this here in Ireland and in the UK where this has been prevalent for many years. People will do nothing, they wont turn up at meetings, they wont vote, they will be slow or wont pay any excess management fees, they wont return correspondence, and they will then still bitterly complain when everything is not done correctly. If things go wrong you will get the blame and it will lead to you having arguments with neighbours.
The government needs to get off their fat you know whats and sort this mess out.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

I agree with you up to your last senetence: just what exactly are you expecting to be done?

You're correct that directors have essentially the same responsibilities regardless of company type, but they can only be held personally liable if they did not personally act correctly.

It's certainly true what you say about complete apathy from people, who you think would be interested in sorting things out. They will moan and complain all right, and get in fits of apoplexy when they realise they can't sell their property when the time comes, but get involved? sure that's some other poor mug's job.

Anyone who is brave enough to step up to the mark needs to get professional advice and do it with their eye's wide open. As I said, there's no personal liablilty if you act correctly, but there's some serious responsibilities involved, and you can't just walk away from them if you don't like what you find.

 

[dam099]

Re: Becoming a director on a limited by guarantee company

Anyone who is brave enough to step up to the mark needs to get professional advice and do it with their eye's wide open. As I said, there's no personal liablilty if you act correctly, but there's some serious responsibilities involved, and you can't just walk away from them if you don't like what you find.

The OP was told "that as the company was limited by gaurantee it is not the same as being a director with a non limited by guarantee company, directors can not be held personally responsible for anything and all residents are equally liable should anything go wrong".

Thankfully this did not ring through to him and he came on here and was given some useful advice.

How many residents might take this at face value and become a director ignorant of their responsibility? How many of these will have even heard of reckless trading let alone know what it is? One does not have to actively act incorrectly to be quilty of reckless trading simply being ignorant of your responsibilities and passively letting the situation continue could in some circumstances be considered reckless trading for which a director could be personally liable.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

One does not have to actively act incorrectly to be quilty of reckless trading simply being ignorant of your responsibilities and passively letting the situation continue could in some circumstances be considered reckless trading for which a director could be personally liable.

Absolutely, which is why I said anyone in this situation needs advice and to do it with their eyes wide open. Pleading after the case "I didn't know what I was supposed to do" or "I didn't know what was going on" won't wash: as a director it's your responsibility to know what's going on (or to be able to demonstrate you took all reasonable steps to find out).

However, if you're prepared to do this, there should be no danger of taking the rap for someone else's misdeads just because you're a director, which is what I think one of the concerns is.

There was an interesting case in the papers last week about Eddy Hobbs who was a director of a company in pretty catastrophic circumstances, but because he acted responsibly was commended rather than censured (or worse) for his actions (I'm a bit vague on the details, but that's what I took from the reports).

 

[ubiquitous]

Re: Becoming a director on a limited by guarantee company

However, if you're prepared to do this, there should be no danger of taking the rap for someone else's misdeads just because you're a director, which is what I think one of the concerns is.

There was an interesting case in the papers last week about Eddy Hobbs who was a director of a company in pretty catastrophic circumstances, but because he acted responsibly was commended rather than censured (or worse) for his actions (I'm a bit vague on the details, but that's what I took from the reports).

It took Eddie the guts of a decade, and several trips to the courts, to have his good name vindicated in this way. I am sure that the whole saga was a nightmare for him. Its very easy to say that there "should be no danger of taking the rap for someone else's misdeads just because you're a director" but not many people have either the money or the stomach to defend themselves in the courts if something unexpected happens.

 

[KalEl]

Re: Becoming a director on a limited by guarantee company

It took Eddie the guts of a decade, and several trips to the courts, to have his good name vindicated in this way. I am sure that the whole saga was a nightmare for him. Its very easy to say that there "should be no danger of taking the rap for someone else's misdeads just because you're a director" but not many people have either the money or the stomach to defend themselves in the courts if something unexpected happens.

Exactly...the problem is a resident becoming a director of a company which is trading recklessly would be obliged to take action immediately. This would jeopardise their and other resident's properties. It'd be like shooting yourself in the foot. I would like to take a more active role in the running of the management company but cannot risk my own situation.
Ang, it is an offence to continue trading recklessly. I go back to saying there has to be a special category of directorship created for residents in management company situations. You'd still have traditional directors-the builders. They have made the vast profits which would justify the obligations they would face. But as things stand right now, residents could find themselves in deep trouble if they are proactive enought to step forward.

 

[ang1170]

Re: Becoming a director on a limited by guarantee company

Exactly...the problem is a resident becoming a director of a company which is trading recklessly would be obliged to take action immediately. This would jeopardise their and other resident's properties. It'd be like shooting yourself in the foot. I would like to take a more active role in the running of the management company but cannot risk my own situation.
Ang, it is an offence to continue trading recklessly. I go back to saying there has to be a special category of directorship created for residents in management company situations. You'd still have traditional directors-the builders. They have made the vast profits which would justify the obligations they would face. But as things stand right now, residents could find themselves in deep trouble if they are proactive enought to step forward.

Believe me, you have my sympathies. I was involved in something like this a few years back, but luckily moved before it became too serious. I've also been involved in a (regular trading) company that hit financial difficulties - luckily subsequently resolved. It's a huge worry - not that I probably have to tell you this.

I still have trouble with what you seem to be asking for: two classes of director (with pesumably equal powers), but one doesn't have any responsibility or personal liability for their actions (or lack of actions)?

I wouldn't imagine any trade creditors would be too amused to find out (for example) that not only the company they'd been dealing with had been trading recklessly, but that there were directors involved who knew what was going on but couldn't be touched because they were one of these "special" directors. On that point: if the management company is trading recklessly, how is it worse if something is done about it?

I can understand the reluctance to step forward though: having been the director of a company that was perilously close to trading insolvently, it's a huge concern, both for one's own position but also concern for innocent parties involved. It's not a nice place to be, but at the end of the day someone has to take responsibility.

 

[simplyjoe]

Re: Becoming a director on a limited by guarantee company

You're way off the mark here.
Our management company has been forced to pay approximately €3,000 in fines to Companies Office since its incorporation. This money has come from company funds...i.e. money I and the other residents have put into the company by way of management fees. We are arguing that the directors (in this case the builders) should pay these fees but it's a tough fight. I would like to be a director of this company but cannot and will not accept the liabilities that go with a standard directorship. So what do we do? Keep the status quo and continue to be ripped off? And I use the term ripped off knowing meaning what I say. Or become a director of a shambolic company to look after my and other residents' interests and jeopardise my own career?
These companies are a special case...and normal rules cannot apply.

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!!!!).