Body Corporates – Meetings and decision making during COVID-19 lockdown

April 10, 2020

in Corporate & Business,COVID-19,Property,Unit Titles

We act for a number of Body Corporates throughout New Zealand.

Several of our Body Corporate clients have contacted us to understand how they are to operate during the level 4 lockdown and particularly how to conduct meetings.

We are aware that there have been some suggestions that the Unit Titles Act prevents Body Corporates conducting business at meetings unless owners are physically present at the meeting.

We believe that this assessment is driven by a rather restrictive and conservative interpretation of the Unit Titles Act and wording within the Act.

It is certainly correct that the Unit Titles Act does use some prescriptive wording such as “attend and be heard”, being “present” at a general meeting and in some instances the wording is “in person”.

There is also no specific provisions that provide for audio and/or audio and visual conferencing for meetings.

However given the circumstances of this particular macro event, we believe that the legislation needs to be considered with a more relaxed interpretative approach.

We suggest that the approach in the Companies Act would be analogous and likely to be a guide. It specifically provides in schedule 1 of the Act for meetings to be held by:

  • Physical attendance at a venue for a meeting; or
  • Participating in the meeting by means of audio, audio and visual or electronic communication; or
  • A combination of both of the above methods.

We note that the Companies Act specifically states that in order to avoid doubt a shareholder participating in a meeting by means of audio, audio and visual or electronic communication is “present at the meeting” and “part of the quorum”.

The highlighted words are important because they are critical components of meetings for conducting business and passing resolutions under the Unit Titles Act.

Given that the Body Corporate is in the nature of a corporate entity, we believe that any Court would support a contention that although the Unit Titles Act is silent it is likely it would accept the terms “in person” or “present” would be aligned with the interpretations in the Companies Act.

While we accept that the Unit Titles Act does not specifically deal with use of more modern audio visual meeting systems it also does not specifically prohibit them. It is also clear that the Unit Titles Act while not specifically dealing with the unusual pandemic event we are dealing with, does contemplate not complying with the standard Unit Title Act provisions including in respect to notice and content of notices, in the case of extraordinary meetings called for emergencies.

Regulation 9 of the Unit Titles Act specifically states that “in the case of an emergency” the Chairperson or Body Corporate Committee may give notice of an extraordinary general meeting, other than in accordance with the regulations provided the Chairperson and/or Body Corporate Committee makes reasonable efforts to notify every unit owner before the meeting. That would therefore abrogate the requirements in the regulations about any notice of intention to hold a meeting notifying the “venue” of the meeting.

It could therefore be contended that the regulations contemplate that in the case of emergencies the Body Corporate has the ability to act outside the strict protocols mandated under the legislation including not requiring physical in presence meeting.

We would also note that it is possible to use a combination of the above processes to still achieve compliance with the Unit Titles Act and in this regard we refer to the ability of the Body Corporate to pass resolutions under the Unit Titles Act either by:

  • Section 103 postal votes; or
  • A resolution in writing under section 104 of the Act.

Therefore it would clearly be possible even on a conservative approach to enable a meeting to take place by owners attending by way of an audio/visual presentation with a combined process of ensuring that resolutions are passed by postal vote or by written resolutions being signed during or at the conclusion of the meeting and forwarded to Body Corporate Chairperson/Body Corporate Manager.

The percentage of voting in any situation remains the same – an ordinary resolution 50% of those entitled to vote and voting or in the case of a special resolution 75% of eligible voters.

Of course the standard eligibility requirements for voting under section 96 of the Act would obviously also continue to apply.

Finally for the sake of completeness we note that the government has announced a suite of measures to assist businesses and other entities in relation to the COVID-19 pandemic and its effects. Legislative amendments currently announced are primarily to the Companies Act and relate to insolvency matters however, we note that there is an intention to provide various entities including Incorporated Societies, Charities or Trusts and other incorporated associations relief where they are unable to comply with their obligations in their constitutions or rules because of the impacts of COVID-19 and to be absolved from doing so until such time as they are reasonably able to preform their obligations.

It is also proposed that such entities will be allowed to use electronic communications including electronic meetings, even if their constitutions or rules do not allow them to do so.

Even if Body Corporates are not included in this temporary arrangement in this context we see it as highly unlikely that a Court will penalise or prohibit a Body Corporate from utilising any of the processes we have outlined above to continue to operate at this time.

We are assisting a number of our corporate clients including Body Corporates throughout this event on a range of issues that are arising that have not been contemplated either by legislation or in practical terms. We are happy to assist specific enquiries should you wish to contact us.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Paul Farry
09 353 6671

The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.

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