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The Difference with Company Title

Wednesday, 30th September 2015

How does Company Title work?

What is the difference between an owners corporation and a company title?

Company title schemes are the predecessors to bodies corporate, now owners corporations.  The company style properties are governed by the prevailing companies legislation, now the Corporation Act 2001 which addresses companies generally and does not deal particularly with home unit companies. 

An owners corporation has legislation (the Act) which is directed at the specific needs of owners corporations with provisions for matters such as maintenance and repair, insurance and obligations of owners.  Such matters are not dealt with by Corporations Law and a company title property is required to set out these matters in its constitution, commonly referred to as the articles of association. Obligations and duties regarding maintenance, insurance and animals are set out in these company documents and may vary between companies, there being no standard statutory provision as for owners corporations.

What is the difference between a company share and stratum property?

A company title scheme is where there is a separate occupancy of units but there is no separate title to any flat.  The land and buildings are owned by a company and the acquisition of a group of shares gives the right to exclusive occupancy of a particular unit and the use of other areas in common with the company owners.  There is no interest in land and a certificate of title to unit is not issued.  The rights and obligations of an owner and the company are usually set out in the company constitution, and possible an agreement or undertaking which a shareholder is required to enter into.  Each group of shares entitling occupancy of a unit must be transferred a a grup and not individually.

A Stratum title provides for separate ownership of lots but was created before owners corporations, previous bodies corporate, came into existence in New South Wales.  A company incorporated under the coproations legilsation owns the risidual land (common property) and carries out functions analogous to an owners corporation.   The owner of a lot has an interest in land and a title to the unit.  The owner of a lot becomes a shareholder in the service company and enters into a service agreement setting out the rights and obligations of the owner and the company for matters such as insurance, maintenance and conduct of occupiers.

Both of the above forms of title come under the prevailing Corporations Law, currently the Corporations Act 2001, and neither is subject to the Act.

What is a company constitution?

A company constitution, formerly known as the Memorandum and Articles of Association, sets out rules regarding management including the powers of the company, conduct of meetings and appointment of directors.

For company share scheme properties, the constitution usually sets out the right of occupancy and rules regarding maintenance and behaviour of owners and occupiers or units.

What are replaceable rules of a company?

The CA has a set of rules known as replaceable rules which deal with the internal adminstration and management of companies.  Section 141 of the CA sets out a table of the provisions contained in the CA that are replaceable rules.

The replaceable rules apply to companies registered with ASIC after July 1998.  Those companies may adopt a consitution which modifies or replaces any or all of the replacement rules.

For a company formed prior to July 1998, its constitution (memorandum and articles of association) will continue to operate unless repealed.  A company may repeal its pre-1998 constitution either use the replaceable rules set out in the CA or adopt a new constitution.

How are directors of a company appointed?

Directors may be appointed by resolution of the company (section 201 G CA), usually at the AGM.

The company's constitution may give a shareholder the right of self-appointment upon the owner giving the company written notice of exercising the right.  Such rights are specific to the company and must be set out in the company's constitution. 

A director must be:

  • a natural person;
  • over the age of 18 years old;
  • not bankrupt;
  • not disqualified from being a director (without the consent of ASIC) (section 201 B CA).

 

This article was supplied by Strata Title Management (STM)

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