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Alex J.
Alex J., Solicitor
Category: Law
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Experience:  Solicitors 2 years plus PQE
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If Memorandum and Articles of Association relate to the management

Resolved Question:

If Memorandum and Articles of Association relate to the management of an existing and defined "Estate" is a Special Resolution of members authorising the Company to negotiate the creation of a separate Estate independent of the original Estate void as being repugnant to the Articles of Association?
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.
Hi,

Thank you for your question and welcome.

My name is XXXXX XXXXX I will assist you.

If you are talking about carving a new estate out of the existing "Estate", then they will have to redefine the definition of "Estate". In order to do this you will have to amend the articles of association.

Under the Companies Act 2006 unless agreed otherwise the only way to amend the articles of association is by special resolution, 75% at least of the voting memberships.

In this case a special resolution is probably sufficient.

Can I assist any further?

Kind regards

AJ
Customer: replied 3 years ago.

The Memorandum states the objects for which the (Management) Company is to acquire an underleasehold interest in premises called "The Estate" and to hold and manage the same for the benefit of the residents entitled to the term created by the Head Lease of the Estate.


Blocks of flats in cathedral Closes do not have an automatic right to lease extensions. the Head Lessor has indicated they would be prepared to grant extensions by way of a NEW tri-party reversionary head lease between itself, the existing Management Company and individual leaseholders/residents entitled as above. The NEW Head Lease and individual leases would be for 90 years and would come into effect in 2104 when the current leases expire but they would be granted now at a cost to present residents who chose to buy them.


At an AGM of the Management Company motions were passed enabling the Company to negotiate a NEW Head Lease to commence in 2014 and to levy all costs thereof on individual current lessees of the Estate.


No amendment to the Articles has been made: is the Company Ultra Vires and are the authorising Motions repugnant to the Articles and therefor void?


Thank you

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

As long as the lease amendments are valid then no this is still not repugnant to the Articles and will not void the motion.

There is a concept known as the Duomatic Principle which removes the formality of company law where the overriding concept has been approved by the members. Ultimately the transaction has been approved by special resolution, by that logic if the articles needed to be amended to give effect to this, then you would easily be able to pass another special resolution.

The only claim you might have here is if your interests are being unfairly prejudiced in which case you halt the action on the basis of unfair prejudice under S.994-996 of the Companies Act 2006.

Kind regards

AJ
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