LTD company - can I do this? (not for profit)

[TonyRPH]

Back in May this year (2023) the developer of our apartment block handed the freehold over to us and at the same time established a management company of which the owners are all directors (pretty straightforward so far).

However, in the interim, one of our owners went into a care home with dementia, and as a result we have been unable to establish a company bank account which is obviously hindering operations somewhat!

On to my question;

Can I establish a new company with just myself and the existing company secretary as directors, and add this new company to the existing company as a director, and then establish a bank account in the name of the new company?

The existing company classification is '98000 - Residents property management' and I expect the new company to have the same classification.

Would there be any tax issues with this?

Thanks in advance.

[Eric Mc]

How many directors of the current company are there?

How many need to be signatories on the bank account?

Has the director with dementia been officially disgnosed?

If so, has someone been given power of attorney over their affairs?

Setting up a second company would make life very complicated and could cause problems with HMRC in being classified as a non-profit flat management company.

[TonyRPH]

Thanks for your reply. Answers to you questions below.

Eric Mc said:

How many directors of the current company are there?

There are 16 directors.

Eric Mc said:

How many need to be signatories on the bank account?

Two would suffice, three would be ideal.

Eric Mc said:

Has the director with dementia been officially disgnosed?

We believe so yes.

Eric Mc said:

If so, has someone been given power of attorney over their affairs?

Not as yet - a relative attempted to get power of attorney but failed. They've now had to resort to applying to the court of protection which is taking forever.

Eric Mc said:

Setting up a second company would make life very complicated and could cause problems with HMRC in being classified as a non-profit flat management company.

I had a hunch this might be the case. It looks as though our hands are tied.

I guess the next step is to seek legal advice with a view to removing the director with dementia, but it appears to be a legal minefield.

[QBee]

Do you need to remove him as a shareholder as well as a director?
If just as a director, then hold a board meeting and remove him, and send the relevant form to Companies House.
It's the shareholder bit that is more of a problem I think.

[nyt]

Can you just remove the unfortunate person as a director: https://www.lblaw.co.uk/services-for-business/corp...

They will still 'own' their share of the freehold but presumably wouldn't be an impediment to opening a bank account.

[TonyRPH]

QBee said:

Do you need to remove him as a shareholder as well as a director?
If just as a director, then hold a board meeting and remove him, and send the relevant form to Companies House.
It's the shareholder bit that is more of a problem I think.

The director is indeed a shareholder (as are all of us).

I'm fairly sure a director can be removed without losing the shareholding.

nyt said:

Can you just remove the unfortunate person as a director: https://www.lblaw.co.uk/services-for-business/corp...

They will still 'own' their share of the freehold but presumably wouldn't be an impediment to opening a bank account.

My understanding here is that the director to be removed must be given an opportunity to appeal - however if said director is incapable of doing so (as in the case of dementia) they are unable to do so.

The fact that this person is mentally incapacitated (as so to speak) seemingly adds huge complications to the matter.

[nyt]

TonyRPH said:

My understanding here is that the director to be removed must be given an opportunity to appeal - however if said director is incapable of doing so (as in the case of dementia) they are unable to do so.

The fact that this person is mentally incapacitated (as so to speak) seemingly adds huge complications to the matter.

I don't think that's correct. Directors are elected by the shareholders of a company. Directors may therefore be removed by a resolution of the shareholders.

The director should be given the opportunity to make a written statement in response, which should be circulated to shareholders. In this situation, it seems unlikely that. there would be any response, or any response that might sway a vote.


One query; you have 16 directors. More than enough signatories for a bank account. Surely you don't need the ailing director's signature for an account?

[Puzzles]

He is trying to open a bank account.

[Eric Mc]

nyt said:

One query; you have 16 directors. More than enough signatories for a bank account. Surely you don't need the ailing director's signature for an account?

That was my first thought. It should be possible to get a bank account sorted without the need to get the dementia afflicted director involved.

[TonyRPH]

Eric Mc said:

That was my first thought. It should be possible to get a bank account sorted without the need to get the dementia afflicted director involved.

When I went through the sign up process with NatWest, their application pulled down all the directors details from companies house, and populated the application form accordingly (see below for events following my attempted removal of 'unwanted' directors).

I followed through with the process, and then removed the director concerned from the application - at which point the application form popped up a declaration "You certify that director xyz has been removed from companies house" (or words to that effect).

So I couldn't remove a director from the application process, without confirming they were no longer registered as a director at companies house.

I checked with the person that was assigned to us for the application process and he confirmed it. So that's where the application ground to a halt.

During the application process every director was sent a form to sign (I never got to see this, as being the primary applicant I would have been the last to receive it apparently).

I don't think I've ever encountered such a convoluted application process.

[z4RRSchris]

you dont have to be a director, you could just have a share.

We set these up (developer) for when we move on, usually 2 directors from the management company, and 4-6 from the residents. The rest have their share and vote but nothing else.

[Eric Mc]

Sounds crazy. There is no legal requirement for every director on the board of directors to be an authorised bank signatory.

Try another bank.

[Tymb]

Could the residents company possibly contract a property management company to look after everything. I’m on a small estate of about 70 properties, we are all shareholders in the estate company but only nominate 4-5 directors at a time, we have contracted out the day to day stuff for years. Any monies required to be paid go into a client account.

[TonyRPH]

Tymb said:

Could the residents company possibly contract a property management company to look after everything. I’m on a small estate of about 70 properties, we are all shareholders in the estate company but only nominate 4-5 directors at a time, we have contracted out the day to day stuff for years. Any monies required to be paid go into a client account.

This has already been considered, however the costs are high for us, because there is such a small number of apartments (16).

In fact, at least two of the companies I spoke with had a minimum of 30 apartments and were quite open about the costs being high for a small number of apartments.

[MaxFromage]

Eric Mc said:

Sounds crazy. There is no legal requirement for every director on the board of directors to be an authorised bank signatory.

Try another bank.

I'm seeing this more often. Computer says no and there's no one there with enough brain cells to fix it.

[Puzzles]

MaxFromage said:

Eric Mc said:

Sounds crazy. There is no legal requirement for every director on the board of directors to be an authorised bank signatory.

Try another bank.

I'm seeing this more often. Computer says no and there's no one there with enough brain cells to fix it.

Me too. It's the process, if you don't fit the process you have to move on.

[TonyRPH]

MaxFromage said:

Eric Mc said:

Sounds crazy. There is no legal requirement for every director on the board of directors to be an authorised bank signatory.

Try another bank.

I'm seeing this more often. Computer says no and there's no one there with enough brain cells to fix it.

I completely agree. There's no allowance (and nobody to make allowance) for unusual circumstances.

The peg either fits or it doesn't, at which point you are left to fend for yourself, trying to find a solution.

Our current solution has been to use a personal account (we have bills to pay / money to collect) but it's only a matter of time before some threshold is triggered and we're scuppered.

[ARHarh]

Does someone have power of attorney for the said person? Could they not sign it till the property is sold, transferred etc. I have no idea if this is possible or not but it is unusual for someone to go into care with some having power of attorney

[TonyRPH]

ARHarh said:

Does someone have power of attorney for the said person? Could they not sign it till the property is sold, transferred etc. I have no idea if this is possible or not but it is unusual for someone to go into care with some having power of attorney

A relative attempted to get power of attorney but failed. They've now had to resort to applying to the court of protection which is taking forever.

So we're sat in limbo...

[Eric Mc]

The bank are being 100% stupid. The law says that a company can decide internally how many directors (or any other person) are required to authorise bank payments.

The bank in this case are "ultra vires" (acting beyond their power) in insisting that EVERY director must be a signatory. That is just imbecilic.

Try another bank - or try applying in a different way.

I had the misfortune to try and set up a Nat West bank account for a club not that long ago. The first attempt was a disaster. The second attempt followed a completely different route and worked fairly well.

It's total chaos in some banks these days.