Report on Multi-Unit Developments - Law Reform Commission

3.07 Poor corporate governance arrangements in some multi-unit
developments have also led to owners‘ management companies being struck
off the Register of Companies. This, in turn, results in the further costs
associated with either incorporating a new company or having the original
company restored to the companies register in order to restore the unit owners‘
original ownership interests. This might lead one to conclude that, as the
company law code was designed primarily with trading companies in mind, it is
not suitable as a legal vehicle for managing multi-unit developments. 13
3.08 The Commission firmly believes, however, that the benefits of using
the company law code far outweigh any perceived disadvantages. The concept
of limited liability, for example, is of clear advantage to owners‘ management
company members. The existence of a regulatory regime which protects
members of the company and requires annual meetings, the presentation and
transparency of accounts, and rules on corporate governance and compliance
generally - and directors‘ duties specifically - all operate for the benefit of the
unit owner. The Commission is of the view that once a more widely understood
culture of collective management and ownership becomes commonplace in
Ireland, as it has in other European States and around the globe, the more the
benefits of the company law code will be appreciated.
3.09 In any event, the Commission notes that there are good reasons why
at least 4,600 existing multi-unit developments have used the current company
law code as a legal vehicle to manage multi-unit developments. In this respect,
an owners‘ management company shares many characteristics, in terms of its
objects, with a trading company. It owns and manages assets. It engages in
contracts with managing agents, insurers and other service providers. It works
for the benefit of a group of people who have invested financially and it is
ultimately responsible to them. In some circumstances, owners‘ management
companies may opt to sell part of the common areas. Indeed, it may be said
that the raison d‘etre of owners‘ management companies is to maintain or
increase the value of the original investment placed in the development by unit
owners.
3.10 While the existing company law code may not have envisaged a
special-purpose corporate entity such as an owners‘ management company,
the Commission notes that the Company Law Review Group (CLRG) has
proposed the inclusion of a Designated Activity Company (DAC) in its draft
13
(LRC CP 42-2006), paras 4.14-4.16 and 8.13; and Dublin City Council Guide to
Successful Apartment Living, June 2006; Chapter 2: Management of Apartment
Developments pp. 14-21.
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