Articles of Association

[Coldwell17]

In 2003 I was invited to join the board of a private company which performs as a residents association. The company articles require that directors should be shareholders or married to a shareholder. I am not a shareholder but my spouse is a shareholder and we live as a married couple. I pay half the service charges. In 2003 I was assured by the then Chairman (who I understood had taken advice from the company solicitor) that it was in order for me to become a director as I had been nominated by a shareholder. It turns out that this is incorrect because only shareholders who are companies can nominate directors.

Since then I have worked as a director and given my services as a professional chartered engineer. I understand that my services are much appreciated and at no time in the past 7 years has my eligibility to be a director has been challenged. I am now the chairman of the company.

A new director appointed a year ago disagrees with a number of company policies and even though she is out-voted 7 to 1 she is determined to make us change. She has discovered that my eligibility is questionable because I am not married to a shareholder. She is now demanding my resignation. I do not want to resign in this way. Can she force me to resign?

[Androcles]

You need to check the terms of the Mem and Arts.

I am a director of such a company. Our M&A states that a director must be a shareholder and that the office of director must be vacated if the director ceases to be a member of the company.

It then says elsewhere in the document that a member of the company must be a tenant of the premises, and where there are two or more tenants then they shall be deemed to constitute one member.

However it then goes on to say that in such cases then the person whose name first appearsin the register of members shall exercise the voting and the other pwers attached to the share.

If your M&A is similar then you may be ineligible.

However, our M&A also has a clause which allows a director to appoint an alternate director at any meeting at which the director is not able to be present, subject to the agreement of the co-directors. This position has full powers, so if yours has such a clause, your spouse could appoint you as the alternate, I suppose.

I do realise that your M&A may be different, but it may shed a bit of light on what to look for in it and hopefully help.

Good luck!

A.

[Androcles]

I forgot to add that our M&A has a clause not dissimilar to the one you quote about shereholders who are companies appointing directors, but this only applied to the set up where the original directors were appointed by the developer's company until such stage as all the flats were sold and the residents company "set free" so to speak.

Thereafter members elected as directors could appoint alternates.

[Skyline D]

Trciky one, that probably needs specialist Corporate Law advice but on the face of it, unless some other part of the Articles gives some exceptions or exemptions, yes she can. You don't meet the criteria for membership of the board. I presume when you say "spouse" you mean partner to whom you are not legally married? I guess that clause could be open to some interpretation if it simply says "married"?

You could of course, presuming a 75% majority of other shareholders would back you, arrange an EGM and have the clause amended by Special Resolution.

Or potentially get your "spouse" to put her share in joint names? Presumably that would make you eligible.