The Origins of Company Title & the
Challenges Facing Owners & Property
Professionals in dealing with Company
Title
12 Dece...
What is ‘company title’?
• Pre-dates first strata
legislation in 1961
• First form of ‘horizontal
subdivision of airspace’...
How is the scheme run?
• Incorporated entity
• Board of directors
• Board has extensive
powers and discretion
• Governed b...
Strata Title Compared

© Copyright 2012 Teys Lawyers

www.teyslawyers.com.au
Problems with Company Title
• Many relate to
the corporate
nature of the
scheme
• Extensive power
and discretion
given to ...
1. Difficulty Assigning
• Articles commonly
require permission of
board
• If not then can use
discretion
• Applies to sale...
Magill v Santina [1983]
• Shareholder requested
permission to have grandson as
tenant
• Under market value as grandson
suf...
Ascot Investments v Harper [1981]
Family Court Act 1975
• S 80 ‘General power of
court’
• May:
• “order that any
necessary...
2. Oppression
• NSW Law Reform Commission:

“the companies involved are usually
small private companies in which the
minor...
How does it occur?
• Board of directors has powers and discretion
given by constitution
• Rarely considered oppressive if ...
What is oppressive?
• Corporations Act
‘oppressive to,
unfairly
prejudicial to, or
unfairly
discriminatory’

© Copyright 2...
Reasonable Person?
• Wilson v Meudon Pty
Ltd
• “to be judged from the
viewpoint of a
reasonable person
associated with a h...
3. Lack of security of ownership
• Ownership subject
to constitution
• Forfeiture of
shares is a
common remedy
in Articles...
4. Difficulty obtaining a mortgage
• Strata lending
– 100% +

-v• Company title lending
– = 70-85%
– IF AT ALL!

© Copyrig...
5. Reduced property value
• Estimated sale
price:
• 10-15% less
than strata
title unit

© Copyright 2012 Teys Lawyers

www...
6. Lack of dispute resolution services
• Strata Schemes
Management Act
• S 123 – person may apply
for order to CTTT
• S 12...
Sale of company title units
• Manager’s must:
– Organise resolution of board in accordance with
articles
– Complete ‘Artic...
Converting to Strata Title
• Benefits:
– Greater security for
owners
– Access to CTTT and
mediation
– Larger market of
pur...
Process of conversion
1. Unanimous
Approval

2. Plan of
subdivision

4. Mortgagee
approval

5. Lodgement
with LPI

© Copyr...
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The Origins of Company Title

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All you need to know about how company title came about

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The Origins of Company Title

  1. 1. The Origins of Company Title & the Challenges Facing Owners & Property Professionals in dealing with Company Title 12 December 2012 © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  2. 2. What is ‘company title’? • Pre-dates first strata legislation in 1961 • First form of ‘horizontal subdivision of airspace’ • Investors purchase shares which give a contractual right of exclusive use • Contractual right not property ownership © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  3. 3. How is the scheme run? • Incorporated entity • Board of directors • Board has extensive powers and discretion • Governed by constitution • Constitution = Articles of Association + Memorandum © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  4. 4. Strata Title Compared © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  5. 5. Problems with Company Title • Many relate to the corporate nature of the scheme • Extensive power and discretion given to board © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  6. 6. 1. Difficulty Assigning • Articles commonly require permission of board • If not then can use discretion • Applies to sale of shares and any short-term assignments © Copyright 2012 Teys Lawyers • Common Law – Must only act ‘bona fide’ in ‘best interests of the company’ www.teyslawyers.com.au
  7. 7. Magill v Santina [1983] • Shareholder requested permission to have grandson as tenant • Under market value as grandson suffering financial difficulty • Board of Directors refused tenancy on the basis that tenants would not treat the building the same as owners • Upheld by NSW Supreme Court of Appeal © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  8. 8. Ascot Investments v Harper [1981] Family Court Act 1975 • S 80 ‘General power of court’ • May: • “order that any necessary deed or instrument be executed…” © Copyright 2012 Teys Lawyers High Court: • Family Court cannot enforce an assignment of shares if directors acting in manner consistent with constitution www.teyslawyers.com.au
  9. 9. 2. Oppression • NSW Law Reform Commission: “the companies involved are usually small private companies in which the minority shareholders are particularly prone to the oppressive conduct of the majority” © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  10. 10. How does it occur? • Board of directors has powers and discretion given by constitution • Rarely considered oppressive if acting in accordance with constitution • Re M Dalley: being a minority does not = oppression • Re G Jeffrey: inability to dispose of shares does not = oppression © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  11. 11. What is oppressive? • Corporations Act ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory’ © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  12. 12. Reasonable Person? • Wilson v Meudon Pty Ltd • “to be judged from the viewpoint of a reasonable person associated with a home unit company” © Copyright 2012 Teys Lawyers • Sheldon v NRMA • Directors to be judged as ‘reasonable director’ in the circumstances www.teyslawyers.com.au
  13. 13. 3. Lack of security of ownership • Ownership subject to constitution • Forfeiture of shares is a common remedy in Articles of Association © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  14. 14. 4. Difficulty obtaining a mortgage • Strata lending – 100% + -v• Company title lending – = 70-85% – IF AT ALL! © Copyright 2012 Teys Lawyers • Why? – Lack of security – Reduced market of purchasers – Increased administrative and legal costs in selling www.teyslawyers.com.au
  15. 15. 5. Reduced property value • Estimated sale price: • 10-15% less than strata title unit © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  16. 16. 6. Lack of dispute resolution services • Strata Schemes Management Act • S 123 – person may apply for order to CTTT • S 128 – person may apply for mediation • S 125 – mediation must be attempted © Copyright 2012 Teys Lawyers • Company title schemes • Supreme Court or Federal Court • Costly • Time consuming • Fact-based decisions = less surety of success www.teyslawyers.com.au
  17. 17. Sale of company title units • Manager’s must: – Organise resolution of board in accordance with articles – Complete ‘Article 30 Certificate’ to ensure due diligence – Issue share certificates – Register transfer of shares with ASIC © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  18. 18. Converting to Strata Title • Benefits: – Greater security for owners – Access to CTTT and mediation – Larger market of purchasers – Greater availability of financial lending – Increased property values © Copyright 2012 Teys Lawyers www.teyslawyers.com.au
  19. 19. Process of conversion 1. Unanimous Approval 2. Plan of subdivision 4. Mortgagee approval 5. Lodgement with LPI © Copyright 2012 Teys Lawyers 3. Stamp duty www.teyslawyers.com.au

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