Nominee Purchaser – Bespoke Articles For Your Limited Company
Collective enfranchisement is the right for owners of flats in a building to come together and buy the freehold of that building. This right to buy the freehold is subject to qualification and the process is quite complicated it is advisable that you contact a solicitor or surveyor when going through the process.
Generally, one of the first things you will need to do is check that there are enough qualifying tenants and that the building qualifies. Once you are clear on this and you are able to collectively buy the freehold you will, at quite an early stage, need to choose a nominee purchaser.
A nominee purchaser is the person who puts their name on the notice to the freeholder, conducts the later stages of the buying process and is responsible for managing the building upon completion. There are no laws governing how the nominee purchaser is selected but it is very common for a group of tenants to create a limited company for the purpose of being the nominee purchaser. The tenants usually become shareholders of the company and a few will also become directors of the company too.
The company must be fully established prior to being named in the notice. Part of being fully established means that the company will need to have its own set of articles of association. Every limited company will have a set of articles which set out the rules that must be followed by the officers and the articles also set out the rights of the shareholders.
Unfortunately when tenants come together to buy the freehold they often do not arrange for bespoke articles to be drafted for their new company. It is just not a priority because there is so much to discuss and organise. As a result these companies often end up with standard articles that do not contain any specific reference to the purpose of the company.
It is important therefore to have properly drafted articles because without them serious and costly problems can crop up later. Properly drafted articles designed for the management of your particular block are therefore essential.
Some of the important points to think about are:
- Will the company be allowed to collect service charges and ground rents?
- How will communal areas be managed and who will be responsible for this?
- Will all the other members of the company need to be notified when one member decides to move away?
- What is the process of transferring membership?
- How will we appoint and remove directors?
- Do we need to hold AGM’s and what is the procedure?
The most effective way of avoiding problems in the future is to make sure your company’s articles are drafted properly and that everyone involved is fully aware of the contents of the articles of association. If they are found to be lacking it is advisable that you take action to change them immediately.
Regardless of whether you are just in the early stages and are doing your research, or if your company is in the process of being set up or already exists, M & N Group will be able to advise you. We can help you to establish your company, draft bespoke articles of association and help you manage your annual compliance obligations after completion. We are specialists in the field and are here to assist you with our fast and efficient service.