Many corporations choose to appoint a manager to assist in running the affairs of the corporation, or to assist the management committee in carrying out its role.
A manager can only carry out the powers and functions delegated to them by the corporation and stated in the contract appointing them. A manager does not have any powers independent of the corporation. Managers have to act in the best interests of the corporation; if they do not, they can potentially be sued for negligence by the corporation.
The legal responsibilities of the corporation do not change with the appointment of a manager. The corporation must still have a Presiding Officer, a Secretary and a Treasurer, who must all be members of the corporation, and it is still legally liable for decisions made on its behalf.
Appointing a manager
Managers can be appointed at a general meeting by an ordinary resolution [Community Titles Act 1996 (SA) s 78A(3)].
The appointment should specify the powers or functions being delegated to the manager. The delegation may have conditions imposed upon it [s 78A(5)(a)]. Even if a delegation of a function or power has been made, this does not prevent the corporation from carrying out the function or power itself [s 78A(5)(b)].
A community corporation may delegate the following functions and powers to a manager [s 78A(2)]:
- the receipt and holding of money and other personal property on behalf of the corporation;
- payment of money on behalf of the corporation;
- the preparation of statements of expenditure and proposed expenditure and statements of accounts;
- the collection of money due to the corporation;
- entering into contracts of insurance with insurers on behalf of the corporation;
- maintaining and keeping records on behalf of the corporation;
- issuing and signing notices on behalf of the corporation;
- preparing minutes of meetings of the corporation;
- providing information as required by the Act on behalf of the corporation;
- investing money on behalf of the corporation;
- arranging for the maintenance and repair of the common property on behalf of the corporation.
A manager cannot be given power to do anything that requires a special or unanimous resolution of the corporation [s 78A(4)].
If it proposed to appoint a manager (or extend or renew a manager's contract) at an annual general meeting, then the agenda for the meeting must include certain items relating to the relevant contract and controls on expenditure [s 81(5)(d); Community Titles Regulations 2011 (SA) reg 16] (see General Meetings).
Documents to be provided
The following requirements must be met when appointing a manager, or renewing or extending a contract with a manager.
At least five clear days before the date of the meeting at which the corporation is to consider whether or not to enter into a contract with a manager, the manager must make available for inspection by members [Community Titles Act 1996 (SA) s 78B(8); Community Titles Regulations 2011 (SA) reg 14(1)]:
- a pamphlet setting out the role of the manager and the rights of the corporation; and
- a copy of the proposed contract, which must have attached to it a copy of the schedule to the policy of professional indemnity insurance maintained by the manager.
The pamphlet must specify the rights of the corporation to [reg 14(4)]:
- inspect records held by the manager;
- revoke the delegation of a particular function of the manager;
- appoint the manager as a proxy and revoke that appointment;
- be informed of any payment that the manager receives from another trader for placing the corporation's business;
- terminate the contract;
- apply to the Magistrates Court for a resolution of any dispute.
- be in writing;
- specify the term of the contract;
- set out the functions or powers to be delegated;
- specify the rights of the corporation if it wishes to end the contract after 12 months;
- set out the remuneration payable to the body corporate manager in respect of the work performed in exercising the delegated functions or powers, or set out the basis on which such remuneration is to be calculated;
- contain a statement verifying that the body corporate manager is insured under a policy of professional indemnity insurance as required by the Act and an undertaking by the body corporate manager that the body corporate manager will maintain that insurance throughout the life of the contract;
- contain an undertaking by the body corporate manager that the body corporate manager will allow any member of the corporation to inspect, at any time during ordinary business hours, the records of the corporation in the possession or control of the body corporate manager and specifying how an inspection can be arranged;
- have annexed to it a copy of the schedule to the policy of professional indemnity insurance maintained by the manager.
The professional indemnity insurance policy schedule
The professional indemnity insurance policy schedule must state [reg 14(1)]:
- the name of the body corporate manager;
- the name of the insurer;
- the nature of the policy;
- the amount for which indemnity is provided under the policy.
Duties of managers
Professional indemnity insurance
A manager must have professional indemnity insurance of at least $1.5 million per claim during a period of 12 months [reg 14(2)]. A corporation’s manager must maintain this level of professional indemnity cover while working for the corporation; if not, the manager does not have to be paid for any period of time they were not covered [Community Titles Act 1996 (SA) s 78B(2)(c)].
Duty to act in the best interests of the corporation
When doing work for the corporation, a manager must [s 78C(2)]:
- act honestly and in good faith;
- exercise due care and diligence; and
- not make improper use of their position to gain, directly or indirectly, an advantage personally or for any other person.
Disclosure of interest
If a manager, or their employee or agent, has a direct or indirect pecuniary interest in a matter in relation to which they propose to perform delegated functions or powers, the manager must disclose the nature of the interest, in writing, to the corporation before performing the functions or powers [s 78D(1)]. Failure to do so is an offence, with a maximum penalty of $15 000.
For example, if the manager will receive a commission for arranging a contract, has an interest in the maintenance company, or is related to a service provider then this must be disclosed to the corporation.
Access to records
A manager who holds records of the corporation must, at the request of any member of the corporation, make those records available for the member to inspect within 10 business days of the request, and provide the member with a copy of any of the records on payment of a fee (the maximum fee is regulated) [s 78D(7); Community Titles Regulations 2011 (SA) reg 14A(3)]. Failure to do so is an offence with a maximum penalty of $500.
The manager’s dealings with the corporation's money
If a corporation member requests, a manager must provide the member, on a quarterly basis, with a statement setting out details of the manager’s dealings with the corporation's money. The manager must continue to provide the statements until the person ceases to be a member or revokes their request [Community Titles Act 1996 (SA) s 78D(5)]. Failure to provide this information when requested is an offence, with a maximum penalty of $500.
Professional indemnity insurance policy
The body corporate manager must, at the request of any member of the corporation, make a copy of the body corporate manager's policy of professional indemnity insurance available for inspection and copying by the member within three business days of the request [s 78B(9)]. Failure to do so is an offence with a maximum penalty of $500.
Trust account audits
Managers or any agent who is authorised by the corporation to receive and hold money on behalf of the corporation are under strict legal obligations. Detailed and complete records must be kept of all financial transactions in relation to the corporation [ss 126(1), 126(2)], and these records must be kept by the manager or agent for at least five years [s 126(4)]. An audit report of the manager's trust account in relation to a corporation must be forwarded to the secretary of the corporation each financial year [s 127(1)(b)]. Any manager or agent who fails to comply with any of these requirements is guilty of an offence with a maximum penalty of $8 000.
In addition, a statement setting out details of dealings by the manager or agent with the corporation's money must be produced to the corporation upon request by the corporation, and within five business days of the request [s 126(3)]. Failure to do so is an offence with a maximum penalty of $500.
Ending a manager’s contract
A corporation's contract with a manager must state the term of the contract [s 78B(3)(b)]. If a corporation wishes to end a contract before the end of the term because it believes the manager is not performing well, it would be advisable for the corporation to obtain legal advice. If the corporation believes the manager has breached their duty to act in the best interests of the corporation, or any other duties under the Community Titles Act 1996 (SA), the corporation is entitled to seek to end the contract. If the corporation and the manager cannot agree about a proposed termination, or the terms of a termination, the dispute resolution process set out in the Act may be used (see Disputes). This process involves making an application to the Magistrates Court.
A corporation may, by ordinary resolution, end a manager's contract that is for a period of over 12 months, which is taken to include any renewal period at the option of the manager, after the contract has run for 12 months. The corporation must give at least 28 days’ written notice of the termination, although the notice period can be less if agreed in the contract. [ss 78B(4), 78B(5), 78B(7)]
Return of records and trust money
If a corporation revokes the delegations it has given to a manager (effectively, if the corporation dismisses the manager or if the contract between them is not renewed), then the manager must return all records and trust money [s 78D(6); Community Titles Regulations 2011 (SA) reg 14A(1)-(2)]. Failure to do so is an offence with a maximum penalty of $2 000.
Return of records
Records must either be returned by mail sent by registered post, or be made available for collection [reg 14A(1)].
Return of trust money
Trust money must either be returned by electronic funds transfer, or by cheque sent by registered post, or be made available for collection [reg 14A(2)].
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