- Management companies: articles of association
Management companies: articles of association
Management companies: articles of association15th March 2021 - Published by Kuits Corporate team
In the second part of our series on management companies, the Kuits Corporate team looks at the importance of having the correct articles of association and some of the key considerations for developers
Management companies are different to all other companies when it comes to their requirements for governance. Some of the key considerations and concerns that have to be covered in the articles of association for a management company are:
- How will the developer keep control over the management company while they are still selling the flats/plots?
- How will the developer cease to have control over the management company i.e. how will a seamless handover of the management company to the property owners be accomplished when the development has completed?
- How will the owners of the flats/houses govern the management company with ease when the development has completed?
If a developer wanted to, it could form a company itself and use the “Model Articles” which are a standard set of articles for use by companies in all different sectors. It is the cheapest and most simple way to form a company.
However, Model Articles or “off the shelf” articles of association for a generic company are not fit for purpose for a management company for a variety of reasons, mainly because they do not address any of the concerns listed above.
Having a bespoke set of articles drafted that are suitable for your management company can help to ensure that things run smoothly through the life of the company.
We can draft articles of association that deal with all of a developer’s concerns, for example by:
- Ensuring that the developer as shareholder/member has weighted voting rights until the very last plot is sold, so that there is no way that the other shareholders/members could out vote the developer;
- Ensuring that the developer has control of the board of directors until the very last plot is sold; and
- Ensuring that the developer is not responsible for the company after the date at which they have sold all of the flats/houses in the development.