Conference on Multi-Unit Developments The Law Society Blackhall Place, Dublin 7 25 January 2007

Highlights of Draft ODCE Guidance on Apartment Owners’ Management Companies (AOMCs) Paul Appleby Director of Corporate Enforcement

Overview  Introduction  Some Important Distinctions  Recommended Good Practice for AOMCs  Limited ODCE Role vis-à-vis AOMCs  Some Concluding Comments

The Distinct Features of Apartment Living  Interdependency  A need for ongoing management  A consequential need for ongoing funding  The need for apartment owners to participate in deciding what arrangements are appropriate

Chapter 1: The Aim of our Guidance  A self-help resource for members of management companies in running their collective affairs  It strays beyond pure Company Law and deals with wider issues of good governance  It suggests that improvements are achievable within the present imperfect legal framework  It does not directly advocate Law Reform as such

Chapter 3: Management Companies and Managing Agents  Each Management Company is composed of the apartment owners who are its members  The Managing Agent is not the Management Company  The Managing Agent is a contractor of the Management Company

Chapter 4: The Key Phases in the Evolution of an AOMC 1)The Developer-Only Phase 2)The Developer-and-Owners Phase 3)The Owners-Only Phase  Directors must always act in the company’s interest

Chapter 7: Members’ Meetings  Every apartment owner/member is entitled to participate  Standard agenda of an Annual General Meeting includes: –consideration of company’s financial statements –consideration of the directors’/auditor’s reports –election of directors –appointment/re-appointment of the auditor/fixing audit fee  Extraordinary General Meetings are sometimes required  Minimum notice period for AGMs is usually 21 days

Chapter 9: Directors’ Meetings  Some formality desirable, e.g., regular meetings, advance notice, draft agenda, minutes, etc.  “Stocktaking” Meetings to check on critical items (e.g., title deeds, insurance), say after transfer of common areas or after new directors are appointed  Regular Budget Meetings  Occasional Long Term Planning Meetings

Chapter 12: Record Keeping  Operational Records: Contracts, Insurance, Title Deeds, Correspondence, Minutes of AGMs/Directors’ Meetings  Financial Records: Accurate income/expenditure details - keeping proper books of account is a legal duty  Statutory Records: Registers of Members, Directors, etc.  AOMC must decide if the Managing Agent can discharge this task/conditions for doing so (e.g., directors’ access)

Chapter 13: Bank Account Operation  Ideally, AOMC funds should be held in a named company account(s) and not be pooled with Managing Agent funds  Consider in particular keeping sinking fund monies separate from day-to-day expenditures  Need for an appropriate degree of AOMC control over company funds, including what authority the Managing Agent will be given to pay bills, sign AOMC cheques, etc  Not a company law issue

Chapter 14: Operational/Financial Reporting  Directors’ Annual Report to Members on the state of the AOMC’s affairs should deliver both good and bad news  AOMC Financial Statements should contain ‘comprehensive and intelligible financial information’  Companies Acts lay down the minimum requirements. Directors should consider going further: –service charge payment performance –level and extent of insurance cover –necessary maintenance expenditure

Chapter 16: Service Charges  Not a company law issue!!  Service charges are usually set by the AOMC’s directors in consultation with the Managing Agent and having taken account of members’ representations  Service charges include inflexible elements (e.g., lighting, insurance, repair costs) plus optional items (e.g., CCTV)  Value for money can be secured by regular competitive tendering, a good contract and insistence on compliance  The safeguard of the auditors’ certificate

Chapter 17: The Relationship with the Managing Agent  Relationship is based on agreed contractual terms  Should be a Standard Contract  AOMC defines the nature/quality of services needed  AOMC selects an agent to provide the services  Performance is a matter of contract law – it’s not a company law issue

Chapter 19: Changing the Articles of Association  Articles are the company’s “internal rulebook”  75% of voting members at an EGM can alter them  Suggested changes include: –when the membership of Developer nominees will cease –AGMs to be held convenient to apartment development –removal of voting ban for member in short-term arrears –restricting a director voting on a contract of interest to him/her

Chapter 21: Winding-Up/Strike-Off  Winding-Up: Seldom (if ever) the appropriate outcome. Refinancing by members a better option  Strike-Off: A real hazard – but one which can be avoided by keeping annual returns up-to-date  Strike-Off is likely to be the end result of more fundamental pre-existing problems in the AOMC

Chapter 22: The ODCE Role  We do not regulate service charges, managing agents or the property law aspects of AOMCs  ODCE’s only role relates to the Companies Acts  Try to help yourself before seeking ODCE redress  Our preference is for administrative remedies  Participation at AGMs/on the Board is an example of active citizenship on behalf of your community

Conclusion  Draft nature of the present Guidance –how can it be improved? –is it relevant to other forms of management company?  ODCE’s consultation period ends on 30 March 2007  Hope to publish a final ODCE “Governance Handbook” later in 2007 supplemented by a shorter document  Have agreed to participate in a Ministerial high level group which will address the wider problems

Conclusion Perception that Company Law was the problem Pleased that the LRC recommended that this legal framework should continue to operate for AOMCs Guidance suggests how Company Law supports informed and accountable decision-making We are for sensible regulation, and we are open to hear any case for relaxing the current requirements

Draft AOMC Guidance is available at and on request from