In order for sectional title schemes to run effectively, certain decisions need to be taken at legally compliant annual general meetings (“AGMs”) by the body corporate. For example, the trustees need to be elected, the budget needs to be approved and the extent of the insurance coverage needs to be determined. These are important decisions that will impact each owner financially. For this decision-making process to be inclusive and democratic, there are provisions in the legislation that require minimum representation by the members of the body corporate. In this article, I will be discussing the AGM quorum requirements for sectional title schemes.
What is an AGM quorum?
A quorum is the minimum number of members of an assembly or society that must be present at any of its meetings to make the proceedings at that meeting valid. Prescribed Management Rule (“PMR”) 19(1), contained in Annexure 1 to the Regulations made under the Sectional Titles Schemes Management Act 8 of 2011 specifically states that no business can be transacted at a general meeting unless a quorum is present or represented, for example by proxies.
A quorum is only constituted by members who are:
- entitled to vote and;
- present or represented (for example by proxy or representative recognized by law).
A quorum is constituted when:
- A scheme has less than four primary sections or members by members holding two-thirds of the total voting values.
- A scheme has more than four primary sections or members by members holding one-third of the total voting values.
- A scheme that has two or more members, at least two persons must be present, unless all the units are registered in the name of one person.
What does the value of votes mean?
PMR 19(2) states that quorum is calculated on the value of votes, and not on the number of votes. The value of votes refers to the member’s participation quota (“PQ”), which in relation to a section or the owner of a section, means the percentage expressed to four decimal places and arrived at by dividing the floor area, correct to the nearest square metre, of the section by the floor area, correct to the nearest square metre, of all the sections in the buildings comprised in the scheme.
The PQ of a section determines the extent of the undivided share in the common property allocated to each owner of a section and more specifically determines the value of the vote of the owner of the section when votes are reckoned in value; the liability to each owner to pay levies; and the liability of the owner of each section for body corporate debts.
The value of votes/ PQs can be located:
- In the scheme’s PQ schedule attached to the scheme’s sectional plan; or
- as set out in a PQ schedule attached to the schemes management or conduct rules.
Elevated quorum requirement
When the body corporate has to vote on an agenda item at the AGM that requires a motion or vote to pass a unanimous resolution the quorum requirement is increased. An example where a unanimous resolution would be required would be for the adoption of a new scheme management rule. At least 80% of the members (reckoned in both number and vote value) must be present or represented at the meeting for a quorum to be present.
Exclusions from quorum calculation
There are two categories of vote values that are not taken into account when calculating a quorum:
- The voting values of units registered in the developer’s name are not taken into account when calculating the value of votes required to constitute a quorum. This provision is designed to ensure that developers do not arrange for the body corporate to take important decisions, without the presence of a reasonable number of other owners. This provision could cause difficulties in cases where developers choose to retain a substantial number of units in a scheme.
- To establish a quorum, and for the purposes of AGMs any section registered in a body corporate’s name, is not taken into account, and the body corporate is not considered to be a member of itself in terms of PMR 19(3). This provision effectively suspends the representation rights attached to any unit registered in the name of the body corporate so that meetings are constituted only based on member representation.
In a situation where a quorum is not present, PMR 19(4) states that if within 30 minutes from the time appointed for a general meeting a quorum is not present, the meeting stands adjourned to the same day in the next week at the same place and time. If on the day to which the meeting is adjourned, a quorum is still not present within 30 minutes from the time appointed for the meeting, the members entitled to vote and present in person or by proxy constitute a quorum.
Meetings conducted online
PMR 17(1) specifically authorizes meetings done by telephone or any other method that is accessible to all members and persons entitled to be present at the meeting, and permits those persons to participate or communicate with each other, and allows the chairperson to confirm with reasonable certainty the identity of the participants. There are many benefits of hosting an AGM via online platforms. To hold an AGM remotely online via a platform such as Zoom, the quorum is calculated by counting the members’ voting values who are attending the meeting remotely.
As we can see from the above discussion the calculation of the quorum is dependent on several factors and considerations. The quorum requirement itself can change during the course of a meeting, for example where an agenda item during the AGM requires that the body corporate vote on a unanimous resolution the quorum requirement is elevated.
I have attended meetings where managing agents have sat with PQ schedules and calculators trying to establish whether a quorum is present. This can lead to disruptions, delays, and mistakes during the meeting.
Stratafin has developed a quorum and voting calculator that takes all the considerations into account and makes calculating the quorum quick, easy, and simple.
Written by Dr Carryn Melissa Durham of Stratafin.