Annual General Meetings – 6 Key Questions

Annual General Meetings (AGM`s) may seem daunting or laborious when you first acquire a property in a sectional title scheme but it is an important and necessary responsibility.

The Sectional Titles Act 95 of 1986 governs Annual General Meetings (AGMs) in sectional title schemes and it determines the outcome an owner can expect when attending an AGM.

1. Why is an AGM necessary and why should you attend?
As a legal entity, a body corporate needs to submit financial statements to its members, thus a meeting is required in terms of the new Sectional Titles Schemes Management Act of 2011 for this purpose.

It’s the only opportunity to discuss the financial affairs of the body corporate in a general forum. As an owner, it is necessary that you keep informed about how the body corporate is being managed as well as special projects that may influence the financial position of the body corporate such as a special levy.

2. When should it be held and how much notice is given?
Within four months after the financial year end. A minimum of 14 days’ notice is required.

3. What documents do owners need before the AGM?
The draft annual financial statements, a proposed budget of income and expenditure and the schedule of replacement values (for insurance purposes). A form of proxy allows an owner who may not be able to attend the AGM, to appoint a proxy to attend and vote on his behalf.

4. What is a quorum?
A quorum is the number of attendees needed at the AGM for the meeting to proceed, be it in person or by proxy. In the new Sectional Titles Scheme Management Act of 2011 the quorum is calculated based on the participation quota value (PQ) of each section in the scheme. If a scheme has four or less sections, then a value of 66.66% is required. A scheme of more than 4 sections requires a quorum of 33.33%.

5. What points need to be covered at the AGM?
The three key elements that need to be discussed at the AGM are as follows:

  • The proposed budget for the coming year and the annual financial statements for the past year
  • Insurance: the schedule of replacement values with updated values for each section
  • Election of the trustees, the determination of any directions or restrictions to be imposed on the newly elected trustees

6. Voting at AGMs: How does it work?
There are three ways in which voting can be conducted at an AGM:

  • By show of hands
  • Secret ballot
  • By PQ (participation quota)

Voting at an AGM is determined by the participation quota value of each section. A majority vote in value will allow a vote to be passed.

Bonus question: What actions must be taken by the trustees following an AGM

  • Appointment of a chairperson
  • Passing of a resolution to increase the levies
  • Passing of a resolution to raise interest on outstanding levies
  • Passing of a resolution mandating the managing agent to take legal action against defaulting owners on behalf of the body corporate
  • Informing the owners of any levy increase within 10 days of the AGM

Next we will cover the first point on this list in more detail: Why is an AGM necessary and why should you attend?

Author: Leigh Maingard – MD Stonewood Properties
Stonewood Properties is a professional property management company that specialises in administrating community schemes such as sectional title bodies corporate, homeowners’ associations (HOA) and residential estates in Johannesburg and Cape Town.