Legal Requirements of an AGM: What scheme executives must know
While an AGM could seem like an unnecessary formality, it is one of the most crucial aspects of proper management within a Sectional Title Scheme.
Pearl Scheltema, CEO of Fitzanne Estates, and Johlene Wasserman, Manager of Governance, Compliance and Enforcement at Community Schemes Ombud Service, (CSOS) explain that it’s also the only way to protect yourself against badly run schemes.
What is expected at an AGM?
“It is essential that scheme executives familiarise themselves with the requirements and regulations of an AGM to ensure that a meeting is called and convened correctly,” says Scheltema.
These regulations include the following key considerations: an AGM must be held at least once a year, within 4 months of the end of the financial year, the date, time and venue of the AGM must also be reasonably communicated to all owners.
“It’s so important for owners to be present at the AGM. Remember that, as long as there was a proper notice sent to members, decisions made at the meeting are valid even if you weren’t there,” Scheltema cautions.
Wasserman emphasises: “The prescribed management rules of the Sectional Titles Schemes Management Act (STSMA) goes so far as to decide what is to be discussed at the AGM, and specifies that all these topics must be covered, decided upon and ultimately executed by the Scheme Executives of the scheme.”
What happens if you can’t attend an AGM?
Due to the nature of an AGM, it’s crucial for enough scheme executives to be present for the decisions made to be enforceable.
That’s where quorum requirements come in. Scheltema explains: “For schemes with less than four primary sections, two-thirds of the total votes in value and eligible to vote must be present for the meeting to be valid.” In schemes where there are four or more, at least one-third must be present.
If a member is unable to attend, they can be represented by proxy. This essentially gives another member voting rights on behalf of the absent member. It’s important to note that a person cannot act as a proxy for more than two members.
When this isn’t possible, the meeting must be adjourned and rescheduled for the same time and place the following week.
“Sufficient attendance and observing of all rules in terms of the STSMA is crucial for the long-term health of a scheme. The CSOS makes it easier for schemes to abide by the rules,” Scheltema explains.
What if the rules aren’t followed?
The CSOS was formed to regulate the conduct of parties within community schemes. Wasserman emphasises that the CSOS can only enforce existing legislation.
This has real implications for owners who are unhappy with the state of their scheme: “Dissatisfied members must be able to prove their case when raising a dispute. All AGM prescriptions must be followed for owners to have a leg to stand on, should any issues arise.”
Arming yourself with the necessary knowledge of the AGM process within your scheme is crucial to protecting your investment and equipping yourself for success. As a scheme executive, it can be easy to feel overwhelmed by the requirements and guidelines.
Education is key
While there’s much uncertainty about what 2021 will hold, one thing that remains abundantly clear is that property professionals need to stay informed and at the forefront of the knowledge pool.
“Comprehensive Scheme Executive training such as the courses offered by Fitzanne Estates cover all necessary information needed to protect a property’s value and equips property owners to be effective trustees,” Scheltema says.
“Bite-sized tips and insights are also at hand in the form of our property exchange podcast.”
You can’t afford to fall behind on property trends and legislative requirements, least of all if you’re a trustee or scheme executive, so make sure you equip yourself in every possible way.
Scheltema advises both buyers and sellers to consult a qualified, experienced estate agent for advice on the current property climate. Fitzanne Estates specialises in guiding property owners in their real estate journey and are ready to assist you during this exciting yet confusing time.
When you purchase a unit in a sectional title scheme you gain 3 things:
- the section in which you reside
- an undivided share in the common property and
- membership to the body corporate.
You exercise your democratic right to vote and take decisions on the operation of the body corporate in general meetings.
Every body corporate must hold an AGM. There are minimum requirements for the notice convening the AGM. Prescribed management rules (PMR) contained in Annexure 1 to the Regulations made under the STSMA 15(3) states that the notice of a general meeting must be accompanied by at least:
- the prescribed agenda
- a copy or comprehensive summary of any document that is to be considered or approved by members at the meeting
- a proxy appointment form in the prescribed format.
Section 6(1) of the STSMA sets out that the meetings of the body corporate must take place at such time and in such form as may be determined by the body corporate.
PMR 15(1) requires that at least 14 days’ written notice of a general meeting specifying the place, date and hour of the meeting must be given to:
- all members
- all registered bondholders
- all holders of future development rights and
- the managing agent.
According to Dr Carryn Melissa Durham, sectional title attorney of the Paddocks Private Consulting Division, it is important to note that there are exceptions where short notice is accepted as set out in PMR 15(7). Furthermore, 30 days’ notice is required for AGMs where special or unanimous resolutions are on the agenda. PMR 15(4) requires that the AGM must be held in the local municipal area where the scheme is situated, unless the members have by special resolution decided otherwise.
Prescribed proxy form
“Section 6(5) of the STSMA states that a member may be represented in person or by proxy at general meetings of the body corporate. There is also a restriction that a person must not act as a proxy for more than 2 members. Where a member wishes to a appoint a proxy, they should consider the possibility that the person will receive other proxy appointments for the same meeting. If this appears likely, the proxy appointment form can be amended to provide that the proxy is appointed ‘with power of substitution’.
“PMR 20(5) states that a member’s appointment of a proxy, and the proxy’s acceptance of the mandate must, except in the case of an appointment in a mortgage bond, be substantially in the prescribed form. In terms of Regulation 5(3) made under the STSMA, the notification by a member to a body corporate of the appointment of a proxy must be substantially in accordance with Form C, as prescribed in Annexure 3 of the Regulations,” she advises.
The prescribed proxy form must be delivered to the body corporate 48 hours before the time of the meeting or handed to the chairperson before or at the start of the meeting.
“Finally, the votes of members who are artificial entities such as companies and close corporations must be exercised by natural persons they have appointed as their representatives in accordance with the provisions of their governance documents. In terms of PMR 20(4) where a member owns a unit in their capacity as a trustee of a trust, that member is the only person entitled to exercise the vote and the beneficiaries of the trust are not entitled to vote,” Durham says
Trustee nominations and acceptance forms
PMR 7 states that trustees must be elected at the first general meeting of the body corporate, and then at each subsequent AGM. A member may nominate any natural person (including themselves) for the office of trustee.
The nomination of a trustee must be in writing, accompanied by the written consent of the person nominated. It must be delivered to the body corporate service address at least 48 hours before the AGM is due to start. If there are not at least as many valid nominations made before the meeting as the meeting decides there are to be trustees, then further nominations can be called for and made at the election meeting with the consent of the nominees.
Minutes of last AGM
The minutes of the last AGM will be included in the AGM pack. It is important to review these minutes to check for their correctness and to familiarise yourself with the minutes of the last AGM.
PMR 17(6)(f) sets out the prescribed agenda for general meetings, and specifically requires that the members approve, by ordinary resolution, the minutes from the previous general meeting.
In checking the correctness of the minutes and approving them, owners should check that the minutes fulfil the minimum requirements as set out in the rules. In terms of PMR 27(2)(a), the body corporate records must include minutes of all meetings with:
- date, time and place
- names and roles of those present, including details of the authorisations of proxies and member representatives
- text of all resolutions and
- results of all voting on all motions.