In Part One of this article, we explained that a replacement trustee may be appointed by the remaining trustees when a trustee ceases to hold office, or, if all trustees have vacated their positions, by the members in a general meeting. The appointment is for a specified period, for example, six months or usually until the next Annual General Meeting. They need not be an owner and will have the same functions and be subject to the same obligations as a trustee.
Reimbursement, remuneration, and compensation of trustees
The question that now arises is to what degree you will be reimbursed, remunerated, and indemnified as a trustee. Prescribed management rule 8 provides that the body corporate must reimburse trustees, elected or replacement trustees, for all disbursements and expenses actually and reasonably incurred by them in carrying out their duties and exercising their powers.
Trustees who are owners are not entitled to any reward, monetary or otherwise, for their services unless the owners, at the General
Meeting, decide otherwise by special resolution. There is a distinction concerning trustees who are not owners in that the rules provide they may be rewarded for their services, whether monetary or otherwise, upon approval of an ordinary majority resolution of the body corporate as part of the budget for the scheme’s administrative fund. This is also applicable to replacement trustees.
Indemnification and trustee liability
The body corporate must indemnify a trustee, who is not a managing agent, against all costs, losses, and expenses arising as a result of any official act that is not in breach of the trustee’s fiduciary obligations to the body corporate. (The fiduciary duty and breach thereof by a trustee will be dealt with in a separate article.) It would be prudent for the body corporate to take out indemnification insurance to indemnify the trustees.
Powers and functions of trustees
The Sectional Title Schemes Management Act (STSMA) provides that, subject to the Act, the rules, and any restrictions imposed at a general meeting of owners, the functions of the body corporate are to be exercised and performed by the trustees in office.
It is incumbent on the trustees to meet regularly to conduct the business of the body corporate and to adjourn and otherwise regulate these meetings, subject to the provisions of the Sectional Title Schemes Management Act (STSMA), the prescribed management rules, and the common law governing meetings.
Notice periods and meeting procedures
Trustees must be able to give short notice of meetings in order to manage the scheme properly and effectively. The rules require that not less than seven days’ written notice of the time and place of a meeting be given. In cases of urgency, shorter notice may be given, provided it is reasonable in the circumstances. Notice need not be given to trustees who are absent from the Republic.
Meetings may also be held via telephone, Zoom, or Teams. The trustees may also set the date and have a standard agenda for future meetings by written resolution, for example, the first Friday of a month at 16h00 at the unit of the chairperson.
Attendance and participation at trustee meetings
In the interests of transparency, the rules provide that owners, registered bondholders, holders of future development rights, and the managing agent may attend trustee meetings. Those in attendance may speak on any matter on the agenda but are not entitled to propose motions or vote.
The rules, however, contain an important proviso. Such persons are not entitled to attend those parts of trustee meetings that deal with:
- discussions of contraventions of the Act or rules; or
- any other matters in respect of which the trustees resolve that the presence of any such persons would unreasonably interfere with the interest of the body corporate or any person’s privacy.
Invited experts and limitations on attendance
These provisions allow trustees a measure of discretion to invite suitably qualified persons to assist them in conducting the business of the body corporate. For example, where structural issues arise in respect of certain units, it may be prudent to invite a structural engineer to address or advise the trustees.
The persons entitled to attend and speak at trustee meetings are strictly prescribed by the rules. Accordingly, an owner’s legal representative, for example, is not entitled to be present at a trustee meeting.
In Part Three of this series, we will discuss the appointment of a chairperson and the method of voting at trustee meetings.
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