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tdlawyer, Lawyer
Category: Property Law
Satisfied Customers: 1096
Experience:  Lawyer with 9 years experience of advising on property issues.
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Hello, I am the equal of the freehold in a management company

Resolved Question:

Hello, I am the equal of the freehold in a management company limited by shares. I am on of 15 members/shareholders. Under the Articles I have a right to be a director as do all the other owners. The Articles only allows for the owners to become directors (originally there were B shares for the developer but then changed to ordinary shares).

My first question is it Company Law for the Articles of any property management company directors to only allow members to become directors? If so where can I locate the relevant section in the Act?

Secondly, can I easily be removed as a director and if so what happens to my right under the Articles? If I am removed can I just exercise my right again later?

I was advised than I may be protected under the Minority Shareholder's section of the law. Would the right to become s director be considered fundamental by a court?
Submitted: 2 years ago.
Category: Property Law
Expert:  tdlawyer replied 2 years ago.

tdlawyer : Hi thanks for your question.
tdlawyer : My name is XXXXX XXXXX can assist with this.
tdlawyer : Is this a right to manage company?

It is freehold management company with each owner of the property having one equal share. The flats were developed ten years ago and it was set up like this first place.

tdlawyer : Okay. There is no obligation under company law to force only existing members to be directors. However, the company is allowed to set this requirement in the articles if it wishes, but it is not forced to do so.
tdlawyer : if this were an RTM company, which it won't be, then the position would be the same, but each leaseholder would be entitled to be a member of the company.

No, we are not obliged to be directors just that we have the option. We are leaseholders.

tdlawyer : Yes okay that's pretty normal.
tdlawyer : But you could have none leaseholder directors if the company's articles permitted it.
tdlawyer : You often see this, in fact, where you have professional agents become directors to help out. It doesn't have to be that way, but sometimes it is done this way.
tdlawyer : As for if you're removed, then you might have a claim under s.994 of the companies act, which I think you're referring to on minority protection. However this type of claim is very difficult to run and very expensive.

So it is only the articles that prevent non owners to be directors? what would the articles of this type of company say on Directors?

tdlawyer : Yes that's right. The articles can say whatever the shareholders want them to say although usually they just allow anybody to be a director.
tdlawyer : Is there anything you would like to clarify with me?

Why do you say that is it expensive to protect minority rights and do you think we would have a case for being removed?

tdlawyer : I say it's expensive based on years of experience doing this type of claim. On average we see costs of c £60k+ to trial on something like this.
tdlawyer : I don't know enough about it and I'd need to see the articles etc, to be able to say if there is a case to remove but normally it is very difficult to run and succeed in this type of claim.

what is to stop me becoming a director again if I have the right under the articles? How could they remove the right under the articles and would this be a breach of the s994 and a stronger case?

tdlawyer : Nothing stops you doing it again if the other directors and/or shareholders agree.
tdlawyer : S994 says that it can be wrong to remove a director even if it is lawful to do so.
tdlawyer : There is a great website about this topic here:

The articles are very clear in that each owner has the right if they try to stop me being a director then they are removing my right under the articles, surely that's not right?

tdlawyer : yes that sounds right. In which case I doubt they have a right to remove you at all if the articles give you the right to be a director.
tdlawyer : So you could take out an injunction application to prevent the company doing anything by trying to prevent you being a director.
tdlawyer : Does that make sense?
tdlawyer : I have to go in a moment so if there is anything more you would like me to answer now please let me know.

Do you have any experience of of a case where a shareholder is denied being his right to be a directors?

tdlawyer : Yes many years worth of experience.

Expensive and not very successful?

tdlawyer : Very expensive but usually always settled before trial.
tdlawyer : Parties rarely can afford to get them to trial in all honesty.

OK thanks,

tdlawyer : Thanks you. If you need to ask me anything else late you're welcome to do so. Goodbye for now!
tdlawyer : Please remember to rate the answer for me.

Can you tell me how much it would cost to apply for a petition under s994. Once I have applied is it easy to withdraw?

tdlawyer :

Once you have applied, you're locked into court proceedings until they're resolved at a final hearing, or until you reach an agreement. It would probably cost you about £3,000 - £5,000 to kick off the process and get a petition drafted.


OK, Thanks.


Last question then I will finish.


Under the circumstances what would most shareholder do in my position to protect their rights? The problem is it only takes one bully to try and remove other owners rights. At some point it must reflect on selling prices etc. Do you find people just roll over? I would welcome your opinion given your experience.

tdlawyer : In my experience, the bullies usually win because so few people will stand up to them. The fact you're on here asking this question says a lot about your desire to see the right result but you must always be conscious of he fact that pursuing things like this does cost money and can be time consuming. That said, if you are prepared to stand up to people that have no right to do things then it usually works out right in the end. You need to be able to hit their pocket personally and I would suggest a solicitor rights to them demanding an undertaking they when you challenge them they promise not to use the company's funds to fight that because this would be an issue between shareholders only - not an issue affecting all the residents via the service charge. This step usually makes them think if they want to fight you using their own money!
tdlawyer : Writes to them ... Not rights .... Sorry!

Thanks so much.


I don't think he will worry about money. However the residents should care when as what he is actually trying to achieve will deter property sales. May be they will come out of the woodwork.

tdlawyer : Absolutely, they often do come out the woodwork when they might end up paying more service charge or losing on property value!
tdlawyer : Hope this has helped?!

Thanks again

tdlawyer, Lawyer
Category: Property Law
Satisfied Customers: 1096
Experience: Lawyer with 9 years experience of advising on property issues.
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