The life of a Residents’ Management Company director

It’s not uncommon for leaseholders to live in a block of flats where there is a Residents’ Management Company who’s response for providing services for the benefit of that block. A Residents’ Management Company (RMC) is generally a party to the lease.

Many leaseholders are also taking the step of acquiring the right to manage the block. In those circumstances, a Right to Manage Company (RTM Co) takes on responsibility for the management of the block.

In both cases, leaseholders may choose to become directors of either their RMC or RTM Co. But being a director is not a job to be taken lightly. What are the duties and obligations of being a director of an RMC or RTC Co?

We have provided some information below to help leaseholders understand their duties and obligations as a director.

What is a Residents’ Management Company?

An RMC is a particular type of company which holds certain responsibilities relating to blocks of flats.

 

What does an RMC do?

Under the terms of a lease, an RMC is usually required to perform “management functions”. These are functions with respect to services, repairs, maintenance, improvements, insurance and management.

An RMC receives service charges so that it is able to provide those services and perform those management functions.

 

How are all these obligations fulfilled?

All companies (even RMCs and RTM Cos) have directors.  A board of directors governs a company.  The board represents the interests of the members of the company, and it’s the board that has overall authority for decisions made by the company.

 

What are the duties and obligations of a director?

Because directors look after the affairs of a company, the law imposes a number of duties, burdens and responsibilities on them.  For example, directors must act in good faith in what they genuinely believe to be the best interests of the company.

In broad terms, the general duties under the Companies Act 2006 which apply to all directors are:

  • To act within their powers;
  • To promote the success of the Company;
  • To exercise independent judgement;
  • To exercise reasonable care, skill and diligence;
  • To avoid conflicts of interest;
  • Not to accept benefits from third parties;
  • To declare an interest in a proposed transaction or agreement.

These duties are owed to the company, and if directors breach these duties, the company can enforce them. It’s important to note that this can be initiated by the members of the company if they feel that the directors are in breach of their duties.

It is also important to check the company’s Memorandum and Articles of Association (Mem & Arts) as the Mem & Arts can add further requirements on company directors.

 

Managing Agents

It’s not uncommon for the directors of an RMC to employ the services of a managing agent to assist with the performance of their management functions. A managing agent may also provide company secretarial services.

 

When do director’s duties commence and end?

The director’s duties to the company commence when they become a director. Certain aspects of the duties directors hold continue even after resignation.

Legislation and the Mem & Arts dictate who can be a director, and when disqualification may occur. The Courts also have certain powers to disqualify a person from becoming a director.

Being a director of an RMC is not, therefore, a job to be taken lightly.