By Ané de Klerk
A sectional title scheme’s Annual General Meeting (“AGM”) is the most important meeting members will have during the body corporate’s financial year. It is here that vital issues such as budget approvals and the election of a board of trustees are dealt with. While it is a legal requirement that this meeting be held within four months of a body corporate’s financial yearend, in practice we often find that these meetings are in fact not held within that required timeframe. In this article I will take a look at the three main reasons most often offered as an explanation for such a delay and whether they are legitimate reasons for failing to hold the AGM within the legally required timeframe.
1. We have not received the audited financial statements back from the auditors.
It is important to note that it is not a legal requirement that audited financial statements be presented to members at an AGM. What is required is that the scheme’s annual financial statements be considered by the members at this meeting, but they do not have to be audited at this point. A separate legal requirement is that the audited statements must be presented to a meeting of the members within four months of the financial yearend, but this can be a separate special general meeting called for this purpose. While it is understandable that the scheme’s management may desire to combine these requirements and deal with them at one meeting, (given the prescribed timeframes for both) it is not reasonable nor legal to delay the scheme’s AGM for the sole purpose of killing two birds with one stone.
2. The body corporate’s budgets have not been finalised.
The trustees must prepare the body corporate’s draft budgets before the end of the previous financial year to consider whether or not it is necessary for them to implement levy increases of up to 10% per PMR 21(3) in the interim period between the start of the new financial year and the approval of the new budgets by members at the AGM. This means that the vast majority of work to the budgets must be done before the end of the previous financial year. It is reasonable to expect the trustees to take a couple of weeks after the commencement of a new financial year to make final edits to the budgets (taking the statements of the last month of the previous financial year into account), but this should not take months. Given that most of the work should be done in advance, it would be unreasonable for this explanation to delay the AGM by more than a month or two (depending on the complexity of the scheme’s finances) after the commencement of the new financial year.
3. We are still trying to find a suitable venue to host the meeting.
With an array of virtual meeting spaces to choose from, this explanation does not constitute a valid reason for delaying the AGM. In this regard it is important to note that the legal requirement is that the method used must be “accessible” to all members, not that all members find the method “easy to use” or that they “use it often”. Just like when driving to an actual venue, virtual attendance may require some effort – for example downloading an app or creating and logging into an online profile of sorts, but this is perfectly reasonable. The inability to find a physical space to host members (for example for large schemes with many members) does not constitute a legitimate reason to postpone holding the AGM, given that PMR 17(10) specifically provides for meetings to be held virtually.
If your scheme’s trustees are delaying calling the AGM without a legitimate reason, you are able to seek an order from the CSOS requiring them to call the meeting. Should you require assistance in doing so, you are welcome to email us at info@theadvisory.co.za to obtain a quotation for your consideration.
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Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses. You can reach out to her via email at info@theadvisory.co.za to request an obligation-free quotation for assistance with sectional title meetings.
