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Buachaill, Barrister
Category: UK Property Law
Satisfied Customers: 10106
Experience:  Barrister 17 years experience
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Question 3 of 3 The solicitor of our residents management

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Question 3 of 3

The solicitor of our residents management company (RMC) has admitted in writing that 1. There have been no elections of directors for the last 4 years; and, 2. There has been no accounting of service charges in the last 4 years. Additionally, the RMC has not provided an estimated cost of service charges, as leases require, for 4 years. Such unelected directors are not directors at all, but are merely purporting to be directors, to their significant personal profit. There are over 100 shareholders paying service charges, so the unaccounted for funds are at least ₤400,000.00 (Four Hundred Thousand Pounds Sterling).

3. How do we as shareholders bring the so-called “directors” to account for their actions and/or get rid of them?
1. At the outset, the first thing you need to get is a copy of the management agreement between all the owners of the flat. Normally, the RMC will have a governing memorandum of Agreement or Articles of Association which will set out how the company is to be run. Normally, this will be in accordance with company law. So you should find out the basis on which this management company was set up and how it is to be run, as this will form the basis for how you attack what has gone on.
2. Normally, directors will have to be appointed to the company. So your first course of action should be to call a general meeting and seek to have some different parties appointed as directors of the company. This will then give these new appointed directors power to inquire in to the management of the company and call the previous "shadow" directors to account for the monies which have been received. Under the provision of company law, it does not matter that these "shadow" directors have not been properly appointed. Once they assumed management powers in relation to the RMC, they will be liable in law for all acts and defaults which occurred during their stewardship.
3. I would also advise you to get yourself and those fellow residents who are interested a solicitor of your own who may advise you as to how best to approach the issues and how to best employ your forces. Given that the other side is already legally advised, I would be concerned that you would be at a competitive disadvantage if you did not get yourself a solicitor to assist you.
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