28 Feb How to ensure that your AGM complies with legislation

For many owners in a sectional title scheme, attending the annual general meeting (AGM) is the only opportunity to participate in discussions and decisions concerning the complex.

The trustees are responsible for arranging and running the AGM with the help of their managing agent. The changes made to the Sectional Title Act along with the establishment of the Sectional Title Schemes Management Act a few years ago had far-reaching implications on the manner in which an AGM should be run.

Getting the meeting started – the importance of quorums

As before, the required notice period is still 14 days from when the notice has been circulated.

All sectional title meetings require a quorum to proceed. As per the most recent legislation, a quorum is determined by calculating the participation quota (PQ) present and no longer by a percentage of the represented sections.

Previously one person could represent any number of people for which they held a proxy. This was a problem as, in theory, it potentially allowed one person the decisive vote. These days, each person can hold a maximum of two proxies (for two registered members) which is meant to encourage members to attend the AGM versus just giving away their votes via proxy.

Further guidelines around quorums include:

• In a scheme with four sections or less, a quorum is achieved when a PQ of 66,66% is present in person or by proxy.
• In a scheme with more than four sections, the minimum PQ required to form a quorum is 33,33%.
• If a quorum is not present within 30 minutes after the start time of the meeting, the meeting is adjourned to the next week at the same time and venue. This has not changed in the new legislation.

Agenda points to be covered at the AGM

The Sectional Titles Schemes Management Act provides a prescribed agenda to ensure that specific items are dealt with.

Additional items that have been added under the new legislation are as follows:

• Trustees must report on their activities, all decisions taken since the previous general meeting and any committees established to deal with matters concerning the body corporate.
• The body corporate has to decide on the amount of fidelity insurance they need. This insurance provides cover against the potential loss of funds belonging to the body corporate.
• Trustees also have to provide a status report on implementing the scheme’s 10-year maintenance, repair and replacement plan.
• The body corporate has to approve liability insurance for no less than R10 million, providing cover for potential public liability claims.

Voting procedures at AGMs

Voting on agenda items prior to 7 October 2016 was done by a majority vote (by show of hands). The new legislation still requires a majority vote but the weight of each vote is now determined by the size of the member’s section (PQ).

After each agenda item has been discussed, the chairman initiates voting and once completed, the votes are counted and the outcome is announced by the chairman.

A vote at an AGM for or against a tabled issue is determined by majority vote in PQ value.

Trustee responsibilities following the AGM

Once the AGM has been concluded, the trustees must arrange a trustee meeting to address and pass certain essential resolutions:

1. The first matter on the agenda is to appoint a chairperson at the first trustee meeting. This appointment cannot be made at the AGM.

2.The most important decision that must be taken by the trustees is to pass a resolution that confirms each member’s levy contribution for the year. Section 3.2 of the Sectional Titles Schemes Management Act 8 of 2011 is clear that contributions to any of the scheme funds only becomes payable on the passing of a resolution by the trustees.

3. Pass a resolution to impose interest on members whose levies are in arrears.

4. Pass a resolution to stipulate when the body corporate will take legal action or approach the Community Schemes Ombud Service (CSOS) to assist with the recovery of arrear levies.

5. Prepare a notice to all members with the levy schedule within 14 days after the AGM to confirm each member`s levy contribution.

Conclusion

The trustees and managing agent have a critical role in arranging the AGM.

The trustees must ensure that they comply with the required notice periods and that they correctly calculate the quorum, including when special or unanimous resolutions will be voted on.

They also have to keep a record of all normal resolutions that were approved and follow up with all essential resolutions at a trustee meeting subsequent to the AGM.

Following the correct procedures and having the required resolutions in place is a great advantage to trustees when dealing with legal challenges around arrear levies.