Company titles are a unique ownership structure typically used in pre-1970’s apartment buildings around Australia. Company titles preceded modern day Community and Strata Titles.
With a company title, the registered proprietor noted on the Certificate of Title to the land will be a company, despite the property comprising multiple units or apartments which share common areas. Individual owners will then own shares in the registered proprietor company. These shares provide each shareholder with an exclusive right to occupy a specific unit within the building, by virtue of owning a specific class of share. Therefore, owners are shareholders in the registered proprietor company and not “landowners” in the traditional sense.
With the introduction of Strata title in Australia in the 1960’s, company titles have become less common and fallen out of favour as an ownership structure.
Matters related to the ‘Company’
Company titled properties are regulated by a company constitution (or articles of incorporation depending on the age of the company), or the Replaceable Rules under the Corporations Act 2001 (Cth) (Act).
The company which owns the land will have a number of directors. Like any other company, the directors are responsible for the operation of the company, and in this case, the management of the land. It is common practice that the shareholders (owners who live in the building) are directors of the company, and the requirement to act as a director is sometimes attached to the specific shares owned.
If you are a director of a company, it is important to note that you owe certain obligations and duties as an officer of the company under the Act, which if breached can result in personal liability.
Some of these duties include requirements to:
- act for a proper purpose;
- act in the best interests of the company;
- avoid conflicts of interest;
- act with care and diligence; and
- prevent insolvent trading.
This issue is one of the major reasons that company titles have decreased in popularity as other methods of ownership have been developed.
Incorrect share transfers
- As the ownership of each unit within the company titled building changes with a share transfer, it is important to check whether share transfers have been lodged correctly with ASIC.
- It may be the case that the company records are not up to date and do not reflect the current shareholders of the company – it is important to ensure you are buying the correct share for the correct unit from the right person.
Incorrect meetings and voting
- It is standard practice for a company to hold an annual general meeting. It is important that these meetings follow the requirements of the Company’s constitution and the Act. It is common to see meetings proceed in accordance with Strata or Community title laws. If this is the case, this can lead to decisions made at company meetings being invalid.
Not being across the requirements and responsibilities of a director
- As mentioned above, directors are subject to certain duties. It is not uncommon to see directors acting inconsistently with their duties under the Act simply due to being unaware of their obligations.
- Directors are required to hold a director identification number with ASIC.
Not following the constitution
- All decisions and actions taken by a company need to follow the company’s constitution. If this is not occurring, there is a risk that decisions made by the company may be invalid at law and may lead to adverse consequences in the future.
Banks may be reluctant to lend money
- Due to the nature of ownership of the property (holding shares in a company), lenders such as banks are reluctant to lend money to purchase company tilted properties. This is due to the limited security options available to them compared to a property with a stand-alone title.
In conclusion, company titled properties have a distinct set of complications which are not present in other property titles.
If you are an owner, seller or purchaser of a company titled property, it important to seek legal advice from experienced professionals. Eckermann Lawyers can guide you through the specific processes and considerations involved in this unique type of ownership. Please contact the Eckermann Lawyers team at (08)8366 7900 or via email at email@example.com
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