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Example of certificate of establishment of the body corporate

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Certificate whereby the registrar of deeds declares that a body corporate has been established.

Application for the Registration of a Managing Director and Body Corporate

In terms of section 1 of the 2008 Companies Act, a director means a member of the board of a company, as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated.

‘Alternate directors’ are commonly found in the context of closely held companies, but are not limited to those scenarios. An alternate director is a person elected or appointed to serve, as the occasion requires, as a member of the board of a company in substitution for a particular elected or appointed director of that company. A director will often have a right in terms of a shareholders agreement to appoint an alternate.

The memorandum of incorporation (MOI) determines the minimum number of directors and alternate directors, which, in the case of a private company may not be less than one director. A customised MOI will also set out the eligibility requirements for a director as well as the directors' term of office.

In the case of a standard MOI, the term of office is indefinite and there is no restriction on the number of directors. New directors may be elected by the Board of Directors when there is a vacancy or the company wishes to add directors. Vacancies on the board arise if a director:

• resigns or dies;

• ceases to hold the office, title or designation in the company that entitles the person to be an ex officio director;

• becomes incapacitated or disqualified; or

• is removed.

A director may be appointed by the Board of Directors, unless the Memorandum requires shareholder approval.

Appointment of Directors

The appointment of directors of a company is prescribed in section 68 of the Act. This section stipulates that each director of a company must be elected by the persons entitled to exercise voting rights in such an election. Furthermore, each director should be elected to serve for an indefinite term or for a term as set out in the MOI of the company.

In addition, and unless the MOI provides otherwise, the election of directors is to be conducted as a series of votes, each of which is on the candidacy of a single individual to fill a single vacancy, with the series of votes continuing until all vacancies on the board have been filled. Each voting right entitled to be exercised may only be exercised once and the vacancy may only be filled if a majority of the voting rights exercised, support the candidate.

Section 68(3) allows the board, unless the MOI of the company provides otherwise, to appoint a person satisfying the requirements for election as a director to fill any vacancy and to serve as a director of the company on a temporary basis until the vacancy has been filled by election.

What is a Body Corporate?

A body corporate is a legal entity made up of all the owners in the sectional title scheme. The body corporate exists to represent the owners and manage and control the building/complex by making sure that its financial, administrative and physical needs are taken care of.

Every owner of a unit in a sectional title scheme is a member of the body corporate. This happens automatically when you become an owner. As a result, membership of the body corporate is compulsory (you cannot refuse to be a member of the body corporate). An owner continues to be a member until they sell their unit to someone else or die.

The body corporate has to meet at least once a year at an annual general meeting (AGM).

How is a Body Corporate Established?

When a developer builds a complex or block of flats, they will open a Sectional Title Register on the day that the first unit is transferred to the first owner. Once there are enough owners, the developer will call the first general meeting to formally establish the body corporate.

What is an Annual General Meeting (AGM)?

An AGM is a meeting held once a year by the body corporate (all the owners), trustees and managing agent. This meeting is held so that the trustees and managing agent can report on important issues. It also allows the body corporate to make important decisions.

The AGM must be held within four months of the end of each financial year, unless the owners or trustees decide otherwise at a general meeting. The financial year runs from the first day of March to the last day of February. A quorum (certain percentage of all the owners in the scheme) must be present before the AGM can commence, and this depends on the number of units in a complex.

What is a Managing Agent?

The trustees may appoint a managing agent to deal with the daily running of the building. A managing agent may not make any decisions concerning the body corporate or the building without the approval of the trustees.

When choosing a managing agent the trustees should make sure that the agent is a registered estate agent. Proof can be obtained by asking the candidates for a copy of their Fidelity Fund Certificate, which is issued by the Estate Agency Affairs Board (EAAB). This would mean that the body corporate would be covered by the EAAB’s Fidelity Fund, which would protect the body corporate from losses arising from theft by the managing agent.

The trustees should also check whether the managing agent is a member of the National Association of Managing Agents of South Africa (NAMA). NAMA is a non-profit company specifically established to increase the efficiency of managing agents, keep members informed of any changes and developments in sectional title, and educate trustees of their role and responsibilities. If the agent is not a member, then the trustees should ask the agent whether they would be willing to be bound by the rules of NAMA. This is not a legal requirement, but it adds a level of protection for the body corporate.

What are the Responsibilities of a Managing Agent?

If a managing agent is appointed, they are generally responsible for: • sending out levy statements;

• collecting levies;

• doing bookkeeping;

• advising the trustees in matters;

• assisting with maintenance issues.

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