Many of the difficulties associated with the management and running of a company title building can be traced back to outdated or unsuitable governing documents. Is it time for your company title building to put in place an up-to-date modern constitution and effective house rules?
What are company title buildings?
Prior to the introduction of strata title legislation in the 1960s, ownership of apartment buildings was granted via the purchase of shares in the company that owned the apartment complex. Unlike strata title, rather than owning an individual unit, each shareholder has a proportionate share in the entire building with the right of exclusive occupancy of their apartment. The significance of this form of ownership is that, unlike strata title buildings which are governed by state-based strata title legislation, company title buildings are regulated by the Corporations Act 2001 (Cth).
The Corporations Act 2001 (Cth)
The Corporations Act is a law in Australia that deals with the formation, operation, and dissolution of companies, and sets out the rights and obligations of company directors, officers, shareholders, and other stakeholders. Under Section 180, decisions about a company title building will be made by a board of (volunteer) directors who must exercise their powers and discharge their duties with care and diligence, while also ensuring that their judgments are made in good faith, for a proper purpose, and for the benefit of shareholders.
If you are a director or a company title building and need assistance in understanding any of your statutory obligations, please don’t hesitate to reach out to us for a no-obligation chat by calling (02) 9199 8597 or email us to speak to one of our qualified and helpful people.
Governing Documents
Owing to the historic nature of this form of property ownership, (with many company buildings being formed before 1998), numerous company title buildings have rather old ‘Memoranda of Association and Articles of Association’ as their governing documents rather than a modern company constitution and properly developed ‘house rules’. As a result, directors and shareholders seeking answers to governance questions, may find themselves navigating some rather archaic language and clauses in constitutional documents that do not align with current laws and regulations and that are ambiguous or silent about many practical areas of building management. This makes it extremely difficult for a director to make decisions without putting themselves at risk of breaching their legal obligations.
Why is having up to date governance documents important for directors?
The governing documents of a company title building regulate the company’s internal management. For directors to manage a building, these governing documents must be useful. If they must be constantly amended to allow directors, for example, to make decisions about renovations or property usage, they are no longer adequate. Further, if the governing documents are not clear, directors may fall foul of the Corporations Act and find themselves liable for penalties (including personal).
How we can help
We can help you put in place:
- a modern company constitution that clearly identifies the rights and responsibilities of all shareholders and directors and empowers the Board to make rules and regulations for the building that can be amended, when necessary, through a Board resolution; and
- a set of house rules that provide a method of regulating life in your company title building for the enjoyment of all occupants and which contain specific policies for example, about leasing, renovations, noise, common property, behaviour, security, smoking and pets.
If you need assistance in putting place new governing documents for your company title building, please don’t hesitate to reach out to us for a no-obligation chat by calling (02) 9199 8597 or email us.
The information contained in this post is current at the date of editing – 3 September 2024.