Thinking Inside the Box
By Ané de Klerk
Finding good samaritans to selflessly offer their time to serve their body corporate as trustees can be tough. On the flip side of the coin, some bodies corporate have the luxury of struggling with the opposite problem, namely that their members are so invested in their scheme’s management that an overwhelming amount of them want to become trustees. I recently heard of a (relatively small) scheme that has a total of fourteen trustees – fourteen!
The questions that I often get asked in both of the above circumstances, when a scheme either struggles to get enough trustees or when they feel they have too many, is what is the number of trustees that a scheme should have, is there any guidance on this matter in legislation, and can the schemes governance documentation dictate the amount of trustees to be elected?
As a point of departure, it is important to note that the Sectional Titles Schemes Management Act (“the STSMA”) came into effect on 7 October 2016. The Prescribed Management Rules (“PMRs”) contained in Annexure 1 of the regulations to the STSMA apply to all sectional title schemes and that the matter of the number of trustees to be elected to serve as such is specifically addressed in PMR17(6)(j)(vii), pertaining to the order of business at a body corporate’s Annual General Meeting (“AGM”).
This rule provides that a determination of the number of trustees to be elected for the following financial year must be made at every AGM. Any scheme with more than four members who own primary sections, is therefore obliged to determine the number of trustees to serve as such for the duration of the next financial year at every AGM.
It is possible for the members to amend the body corporate’s management rules to include a rule that sets the exact number of trustees to be elected at every AGM, if they so wish. Optimal numbers of trustees are three, five and seven, depending on the size of the scheme, as these odd numbers minimise the amount of deadlocked decisions. If a board has more than seven members, decision making often becomes difficult and resolutions tend to take longer to be passed.
A unanimous resolution of the members of the body corporate is required in order to approve a management rule that sets a fixed number of trustees to be elected at every AGM. This required unanimous resolution can be tabled for member approval at a general meeting or in writing by making use of a round robin process.
The following requirements have to be met if the trustees wish to pass the proposed unanimous resolution at a general meeting:
- The notice calling the meeting must be sent to all members 30 days prior to the meeting
- The notice must contain the wording of the proposed unanimous resolution
- The notice must be sent to all members via hand delivery or prepaid registered post
The unanimous resolution needs to be taken by 100% of members, present personally or represented at the general meeting and at least 80% of the members in value must be present or represented (by proxy). Should the unanimous resolution be tabled for approval via a round robin process, it needs to be passed by 100% of all the members of the body corporate.
Once the members have approved the management rule setting the exact number of trustees to be elected, a copy of the amended rules must be lodged at the Community Schemes Ombud Service (“CSOS”), within 10 days from the date of the passing of the resolution. The CSOS will then examine the proposed amended rule and issue a certificate of approval.
If the body corporate has not followed this procedure to legally amend their management rules after 7 October 2016, PMR 17 automatically applies and the members must determine the amount of trustees to be elected at every AGM.
