Property Management, Property Rentals and Property Financial Services in South Africa

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Meetings: What’s new in the STSM Act (Act 8 of 2011)?

There are primarily two types of meetings to consider– Trustee Meetings and General Meetings; we will look at the practical change implications for both forms of meetings introduced by the new Sectional Titles Schemes Management (STSM) Act in this article.

What applies to both types of meetings is the new requirement in Section 10 of the Act that the rules must be available at all meetings. There is also a stipulation that no motions need to be seconded.

There is also now an obligation to distribute the minutes to the people entitled to notice of the meeting concerned as soon as reasonably possible, but not later than seven days after the date of the meeting.

meetings

A) Trustee Meetings:

Under the old Act there was no obligation on Trustees to meet. In the new Prescribed Management Rules (PMR) it states that Trustees must meet. There is however a new provision in PMR 11 that meetings can be held telephonically or by other means – for example over Skype or video-conferencing, provided that the participants are identifiable.

A controversial point in the old Act was the fact that owners could only attend Trustee Meetings on invitation of the Trustees and were not allowed to actively contribute at these meetings.  This has been rectified in the new PMR 11 – owners may now attend Trustee Meetings whenever they wish to, and participate but not vote at the Trustee meeting concerned.

Also new is that PMR 11 states that the Trustees may by written resolution set the dates and a standard agenda for their future meetings. If dates for Trustee Meetings are set for the year in advance, ideally Trustees will be able to plan for these and attendance and participation should be improved.

PMR 13 replaces the provision for adjournment of Trustee Meetings in that it states that: “If at a Trustee Meeting a quorum is not present within 30 minutes of the appointed time for the meeting, the Trustees present, but not less than two, may adopt interim resolutions in respect of each item on the agenda.  An interim resolution adopted as such does not take effect unless confirmed either at the next Trustee Meeting at which a quorum is present or by written resolution signed by all the Trustees.

PMR 14 is new rule regarding a round-robin (written) resolution of the Trustees, which no longer needs to be signed by all Trustees in the country – it just needs majority approval now.

B) General Meetings:

Section 6 of the Act is very controversial in that it states that: “A person may not act as a proxy for more than two members.”  We have confirmed that in the case where for instance Patrick owns 10 sections and he gives his proxy to Susan, that will only count as one proxy and not 10, although when votes are quantified by value, that proxy vote will be counted for the combined participation quota (PQ) value of the 10 sections. A prescribed proxy form now forms part of the Act. It stipulates that the person appointed as proxy must sign his or her acceptance, and that the owner can give directions as to how such a person must vote. Trafalgar has updated the proxy form template which will go out in future with Trafalgar-convened Annual General Meeting notices.

Section 6 also requires that when votes are calculated in number, each member has one vote no matter how many sections they own. However, all motions except for special and unanimous resolutions will now be voted on in value (combined PQ). That is, voting in number will only come into play in special and unanimous resolutions.

PMR 15 states that all members, bondholders, holders of Section 25 rights and the managing agent are entitled to receive notice of a General Meeting, but they are also given the right to waive this. PMR 15 also makes more provision now for shorter notice periods of General Meetings.

In terms of Section 6 of the Act, the stipulation is still there that all notices for meetings where a special or unanimous resolution will be passed must either be hand delivered to the owner or sent by prepaid registered post. An addition was made in the new Act that over and above sending the notices in this way, they may also be faxed or emailed, but they cannot only be faxed or emailed.

PMR 17 now gives a comprehensive list of items to be attended to at all General Meetings and this includes the confirmation of proxies and the presentation of proof of notice of the meeting and waivers of the notice. PMR 18 stipulates a number of new duties for the Chairperson of a General Meeting which we will deal with in a future article.

PMR 19 deals with the new quorum requirements for a General Meeting and thankfully replaces the sliding scale. Going forward, for bodies corporate with more than four sections, 1/3 of the members present in person or by proxy (counting PQ value), will be required to constitute a quorum. (There is a 2/3 quorum requirement for bodies corporate with four sections or fewer). In our view this will however make it more difficult to reach a quorum, with the implication that there will be a higher frequency of adjourned general meetings. The requirement for an adjourned meeting to convene at the same time and venue a week later remains. We will also need to work on spreadsheets to calculate quorum value attendance before each meeting – there are luckily experts in setting up formulas and macros on spreadsheets to assist us with doing this as quickly as possible.

Importantly, PMR 19 also provides that the value of votes for the developer must not be taken into account to constitute a quorum. This means that where the developer owns 80% of the units (in value), the quorum requirement must be achieved among the remaining 20% of the members. It also states that any units registered in the name of the body corporate must not be taken into account in constituting the quorum.

In terms of voting at a General Meeting the following owners are not entitled to vote (except for a special or unanimous resolution) and therefore also do not form part of the quorum:

*An owner that fails or refuses to pay the body corporate any amount due after a court or adjudicator has given a judgment or order for payment of that amount; or

*An owner that persists in the breach of any of the conduct rules of the scheme after a court or an adjudicator has ordered that owner to refrain from breaching such rule.

This makes it easier for owners to be able to vote as the previous legislation did not specify that these restrictions only apply when a court or adjudicator order has been achieved.

PMR 20’s stipulations are now that the outcome of each vote, including the number of votes for and against the resolution, must be announced by the chairperson and recorded in the minutes of the meeting.

PMR 20(9) deals with instances where there was a special resolution to be passed, a quorum was not achieved and the resolution was subsequently passed at the adjourned meeting by less than 50% of the members.  We will go into detail regarding special and unanimous resolutions in a future article.

a. First General Meeting:

Section 2 and PMR 16 place a number of responsibilities and duties on the developer regarding the first General Meeting that we normally call the inaugural meeting. We will also expand on these in a future article.

b. Annual General Meeting (AGM)

PMR 17 states that the body corporate is not obliged to hold an AGM if, before or within one month of the end of a financial year, all members in writing waive the right to the meeting and consent in writing to motions that deal with all the items of business that should have been transacted at the AGM; provided that if two or more people are jointly entitled to exercise a vote, all of them must waive the right to the meeting and consent to the resolutions in writing.

The PMRs deal with a number of items that must be placed on the agenda of the AGM, including the approval of a budget for the administrative fund, a budget for the reserve fund and the discussion of a 10- year maintenance, repair and replacement plan.

PMR 17 also states that if any of the items of business that require member approval are not approved at an AGM or any adjournment of the meeting, the resolution not to approve the relevant document must include the reasons for non-approval and the body corporate must have the document revised and submitted to another General Meeting for approval as soon as reasonably possible, until it is approved.

PMR 17 makes provision for a body corporate to make arrangements for attendance at an Annual or Special General Meeting by telephone or any other method, but we do not see how this is practically possible if you need to allow all persons to be able to interact with each other.

c. Special General Meeting:

PMR 17 states that the body corporate does not have to hold a Special General Meeting to consider a resolution if all members waive the right to the meeting and consent to the resolution in writing; provided that if two or more persons are jointly entitled to exercise a vote, all of them must waive the right to the meeting and consent to the resolution in writing.

For any further information, or to review frequently asked questions, obtain more details regarding training material or find links to the source legislation documents, please visit www.trafalgar.co.za/newlegislation

 

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