Dormant freehold property company - what duties are permitted by Directors/shareholders

NameUnavailable

There are probably two companies. A company that owns the freehold, which each party who has a share of freehold flat owns a share in the company (it may be the case that not all leaseholders decided to buy a share in the freehold for example).

Then there will be the management company that collects the service charges and pays for works - this can be run by the residents or outsourced.

I

oldbikebloke

to be classed as dormant a company CANNOT have any SIGNIFICANT accounting transactions during the (accounting) year.

a "significant" transaction basically means any movement at all on the company bank account, so paying a bill or receiving any money (incl interest of 1 penny on a balance) is a significant transaction and will prevent dormant status.

Therefore a management company which is still paying bills cannot, under any circumstances, claim to be dormant.
I suggest you sack the agency and replace them with someone who knows what they are talking about.... 

NameUnavailable

The last part of my message is missing - to add, if anyone pays ground rent that will usually be paid to the freehold company, so it can't be a dormant company.

princeofpounds

This whole issue appears to relate to a debate about the correct accounting format for freehold companies that was happening in the early 2010s. The ICAEW (one of the main accountancy bodies) decided that service charges for freeholds should not be treated as revenue for the company, but are rather money held on trust for the leaseholders. Which appeared to surprise people, as that wasn't the common practice at the time.

The upshot of it appears to be that it became easier to run freehold companies in a dormant manner. Essentially someone else (the agent) takes control of the trust. All the money flows into the trust, and all the bills are paid out of it, including the agent's fees. Nothing flows into or out of the freehold company, so it can be declared dormant and does not have to file a tax return and can file accounts in the dormant format etc. 

Now the trust itself is supposed to file accounts but my reading suggests that it's easy to avoid e.g. a tax return if no taxable income is received. 

I haven't got to the bottom of where this all ended up yet, but it appears it's not just a dodgy request. Further research needed! But I'm sure any accountant who specialises in freehold and residential management companies could give you the low-down. It does give the managing agent free rein to run the trust, and they can probably charge a bit more for the service. It also means that the freeholders become even less likely to sack them.

http://www.flat-living.co.uk/advice/512-service-charge-accounting-latest-news
https://www.accountingweb.co.uk/any-answers/flat-management-companies-and-icaew-tech-release-110
etc...

If you want to make change however, I'd focus on replacing the directors. Until then, they can broadly make what decisions they like.

leafy211

Unfortunately the two directors feel their only responsibility is to turn up to the AGM, and veer away from anything that might cause them to actually have to do something. Their knowledge and skillset is minimal and so they wouldnt contradict or query anything the agency recommends. But it doesnt seem like any other leaseholders want to become part of the board, so things stay as they are.  Its a tricky situation to try and improve or change unfortunately.