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

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Annual General Meeting

The STSM Act stipulates that the Body Corporate should have an Annual General Meeting (AGM) every year within four months after the Body Corporate’s financial yearend.  We have seen owners take the Body Corporate to task if this meeting is not held within the four month period and they will definitely win the case.

It is one of the duties of Trustees to ensure that the accounts of the Body Corporate are audited on an annual basis by independent auditors appointed by the Body Corporate at an Annual General Meeting.

Trafalgar will get everything ready and give it to the auditors.  We will deal with all queries from the auditors and follow up with them until we get the draft Annual Financial statements (AFS) from them.  This then needs to be approved by the Trustees before the auditors will give us the final AFS.

Audit preparation efficiency and a cost and time effective audit is promoted by effective financial management and electronic document management.

There also needs to be a proposed budget approved by the Trustees to be tabled at the meeting for final approval by the AGM.

The Chairperson must do and sign a Trustee report for the year that have passed that must be added to the notices of the meeting.

The Trustees then need to decided on a date for the AGM – we need to give at least 14 days notice of the meeting to all owners and bondholders – and need time to put the notice pack together to email and post to everyone relevant so we prefer to have the notices out about 20 days before the meeting.

The notice of any general meeting must be accompanied by at least the following:

  • an agenda (that we will deal with later on)
  • a copy (or comprehensive summary) of any document that is to be considered or approved at the meeting
  • a proxy form (in the prescribed format) – this is Form C

The order of business of the AGM is prescribed by the STSM Act:

  • Confirm proxies, nominees and other representatives of owners and issue voting cards
  • Determine that there is a quorum
  • Elect a person to chair the meeting (if necessary)
  • Present proof of notice of the meeting or waivers of notice
  • Approve the agenda

This does not mean that items can be added to the agenda at the meeting – it only means that the order of the agenda (as circulated) needs to be approved

  • Approve the minutes of the previous general meeting (if any)
  • Deal with unfinished business (if any)
  • Deal with any business requested by 25% of the owners or bondholders (of at least 25% of the primary sections) (if any)
  • Receive reports from the Trustees or other committees

It is important to note that this is a “Trustee” report and not a “Chairperson” report.  The Trustees must give their input and be aware of what is said in the report. It must be signed by two Trustees or one Trustee and the Managing Agent

  • Approve the schedule of insurance replacement values

The STSM Act stipulates that the BC must do a replacement valuation every three years and table this to the AGM – we will deal with this in a future module.  The STSM Act also stipulates that the BC must prepare for each AGM schedules showing estimates of:

  • The replacement value of the buildings and all improvements to the common property
  • The replacement value of each unit (excluding the member’s interest in the land included in the scheme)
  • Determine the extent of insurance cover ito the following:
    • Public liability
    • Loss of funds
    • Other risks the owners want the BC to be insured for
  • Approval of the admin fund budget and the reserve fund budget

It is important that the budgets be approved by the Trustees before being tabled to owners at the AGM, if the Trustees have not approved the budgets it will be difficult to get to owners to approve it.

  • Consider the annual financial statements (AFS)

Note that it does not say “approval of the annual financial statements”.  This is because the AFS already have to be approved by the Trustees before the Auditor will issue the final set – that is also signed by the Auditor.

  • Appoint an auditor

Only if it will be proposed that new auditors be appointed is it necessary to attach details of the proposed new auditors – i.e. quotes from various auditors.

  • Determine the number of Trustees (unless there is 4 or less members that are owners of primary sections; or where there is an Executive Managing Agent)
  • Election of Trustees (if applicable as per the above)
  • Report on the rules (this no longer is the responsibility of the Auditor)
  • Deal with any new or further business

The agenda item “General” have always been a contentious issue seeing that having this will give owners the impression that they can add anything to the meeting without proper notice being given.  This point now removes the need for the item “General”.  It still does not mean that owner can add new agenda points under this item.  Should owners at the meeting raise points / issues that are not on the agenda it is advisable to give them the opportunity to raise it, but then it is important to explain to them that it cannot be discussed or voted on at the meeting seeing that proper notice of it has not been given to all owners.  These items should then be taken as directions to the incoming Trustees to investigate and possibly table at the next general meeting for discussion and voting thereon.

  • Give directions or restrictions to the Trustees
  • Dissolve the meeting

We then send the notices to all owners and bondholders – to the domicile they selected.

If one of the owners afterwards comes forward with something they want to add to the agenda it cannot be done as the Act states that at least 14 days’ notice must be given with details of all agenda points attached.

At the meeting Trafalgar will have an attendance register for all owners to sign.  This will be used to determine the quorum present.

A quorum is the minimum number of people who should be present or represented at a meeting before the meeting can legally start.

PMR 19 deals with this and stipulates that business may not be dealt with at a general meeting unless a quorum is present.

The STSM Act (since 7 Oct 2016) stipulates that the quorum needed for a general meeting is as follows:

  • Where there are less than 4 primary sections or less than 4 members:
    • Two thirds of the value of the votes of members
    • And they must be entitled to vote
  • For any other schemes:
    • One third of value of the votes of members
    • And they must be entitled to vote

With the following new provisions (since 7 October 2016):

  • At least two people must be present unless all the sections in the scheme are registered to one person
  • When calculating the value of the votes (in terms of the quorum) the votes of the Developer must not be taken into account
  • The value of the votes of any sections registered in the name of the BC must not be taken into account and the BC must not be considered to be a member

The emphasize is here on “entitled to vote” – if an owner is in arrears with his/her levies and a court or adjudicator has given a judgment or order for the payment of that amount or the owner is in contravention of the Conduct Rules and a court or an adjudication has ordered that owner to refrain from breaching such a rule (and there are no special or unanimous resolution to be passed at the meeting) then he/she is not entitled to vote and therefore do not form part of the quorum.

This can lead to the unfortunate situation where there is a room full of people but not enough of them are entitled to vote so you do not have a quorum for the meeting and the meeting cannot start.

PMR 19(4) states that if within half-an-hour from the time appointed for a general meeting a quorum is not present, the meeting shall stand adjourned to the same day in the next week at the same place and time, and if at the adjourned meeting a quorum is not present within half-an-hour of the time appointed for the meeting, the owners present in person or by proxy and entitled to vote shall form a quorum.

At the adjourned meeting there must be at least 2 owners present in person – one person present in person with 20 proxies does not form a quorum.

It is therefore very important to always make sure that you will have a quorum present at the AGM – by getting as many proxies as you can – you don’t want two people present at the adjourned meeting to be able to make decisions on your behalf.

An owner who cannot attend a meeting can appoint someone as their proxy to attend the meeting and vote on their behalf.  A provision was added in the STSM Act (since 7 October 2016) that a person must not act as a proxy for more than two members.  With the emphasize on “member” – it does not say “section”.

Practical example:

Ms Dinah Might is the owner of 3 sections in Sunset Close BC and Past. Da Buck is the owner of 4 sections.  They both give their proxies to Mrs Bee Comm.  This is correct in terms of the Act seeing that both Ms Dinah Might and Past. Da Buck is just one member irrespective of how many sections they own.

Ito PMR 20 a proxy does not have to be a member, but must not be the Managing Agent; an employee of the Managing Agent or an employee of the BC.

The PMR also provides that a proxy must be in the prescribed form and must be either:

  • Delivered to the BC 48 hours before the time of the meeting OR
  • Handed to the Chairperson at the start of the meeting

Under the previous Act – before 7 Oct 2016 – it was stipulated that the proxy must be handed to the Chairperson before the start of the meeting.  The amendment probably came about due to the two proxy rule – when proxies are handed in 48 hours before the meeting there is still enough time to verify the proxies and ensure that each person only has a maximum of two members’ proxies.

It is important to remember that if an owner is not entitled to vote at a meeting his proxy will also not be able to vote on his behalf.

It is one of the duties of the Trustees to compile minutes of each meeting (Trustee meetings and General meetings) and it is also stipulated in PMR 9 that the minutes must be circulated to all persons entitled to notice of the meeting – not later than 7 days after the meeting.

We have a policy at Trafalgar that all AGM minutes must be typed up and sent to the Chairperson for approval within 48 hours after the meeting.

We also have a policy at Trafalgar to have the minutes signed twice – declared as a true copy of the proceedings by the Chairperson and one Trustee or the Managing Agent directly after the meeting and then approved at the next AGM and signed by the Chairperson and one Trustee or the Managing Agent again.  The reasoning behind this is that minutes that are not signed are worthless – so for a year (until the next AGM) you have no minutes to give to owners, banks etc.  And at the next AGM who can remember everything said a year ago?

At the AGM the owners – by approving the proposed budget decides what the annual levies should be.  The Act states that within 14 days after the meeting the Trustees should pass a resolution on how these levies will be payable and notify all owners within the 14 day period.  We have a levy resolution that we ask Trustees to sign shortly after the AGM where they state how levies will be payable:

  • Annually, weekly or monthly? – it is up to the Trustees to decide
  • On or before the first day of each month? – it is up to the Trustees to decide.

Contrary to popular belief the Act does not state anything about how levies will be payable – it is up to the Trustees to decide.

Levies only become payable on the passing of this resolution by the Trustees.

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