Report on Multi-Unit Developments - Law Reform Commission

ecommendations constitute minimum legal obligations which will be applied to
all multi-unit developments, whether incorporated or unincorporated, including
existing multi-unit developments.
3.22 Section (2) of this Part contains a general review of why the existing
company law code has been used for multi-unit developments, and the existing
(understandable) shortcomings in using that code in this setting. Section (3)
discusses in more depth how the CLRG‘s proposed new company law code, in
particular its proposal for a designated activity company (DAC), can be adapted
to multi-unit developments. The remaining sections deal with the detailed
aspects of this. Section (4) deals with incorporation of the owners‘ management
company, while sections (5) and (6) deal with the connected, but separate
issues of a definition of, and name for, an owners‘ management company.
Section (7) makes recommendations on the objects clause and memorandum
and articles of association; and section (8) discusses membership and voting
rights. Section (9) deals with financial reporting, accounts and auditing issue.
Sections (10) and (11) examine two aspects of sanctions for not complying with
company law, strike-off and director liability. Lastly, section (12) looks at training
for officers of owners‘ management companies.
(2) Using the current company law code for multi-unit
developments
3.23 In preparing the Consultation Paper and this <strong>Report</strong>, the Commission
has examined whether the current company law regime facilitates the effective
management of multi-unit developments and whether it might be more desirable
to use a tailored form of company for them. While incorporation as a company
provides a useful legal vehicle for the management of developments, 28 it is also
clear that the existing company law code was not developed with the specific
needs of unit owners in a multi-unit development in mind. It is not surprising,
therefore, that the existing regime poses some difficulties and challenges. 29
3.24 The Consultation Paper noted that the most common type of
company used for multi-unit developments is the public company limited by
guarantee not having a share capital. As Keane notes, using the company
limited by guarantee has the twin advantages that the members will not be
required to provide the company with any cash either on its formation or during
the course of its active life and that the management of the company is normally
entrusted to a council or committee elected by the members rather than a board
28
Office of the Director of Corporate Enforcement Draft Guidance: the Governance
of Apartment Owners‟ Management Companies, para 2.3.
29
(LRC CP 42-2006) para 4.16.
65