When can a Trustee be replaced?

Introduction

Owners can appoint another person as a proxy to attend general meetings. In contrast, trustees cannot appoint a proxy to attend trustee meetings on their behalf. Trustees often incorrectly assume that if they are not able to attend a meeting, they are entitled to appoint someone else to do so in their place.

What does the legislation state?

Prescribed management rule contained in the Regulations to the Sectional Titles Schemes Management Act 8 of 2011 (“PMR”) 7(7) states that:

“The trustees may appoint, for a specified period, a person qualified to serve as a trustee as a replacement for any trustee who is absent or otherwise unable to perform the duties of that office.”

When is a replacement trustee required?

Examples of situations where trustees are absent or otherwise unable to act as trustee are where they are temporarily ill, are overseas or on holiday or have other work commitments.

Who appoints the replacement trustee?

There is sometimes confusion as to whether the replacement trustee must be appointed by the trustees collectively or by the trustee who is absent, unable to attend meetings or otherwise unable to perform their duties for a certain period. This provision clearly requires a resolution by the trustees by majority vote to appoint a temporary replacement for a trustee.

I suggest that at the first trustee meeting after the annual general meeting at which the trustees were elected, that the trustees place the appointment of a replacement trustee on the agenda.

Who should be appointed as a replacement trustee?

There are a number of possibilities of persons who could be appointed as replacement trustees. For example, the trustees could appoint one of the persons who was nominated but not elected as a trustee at the annual general meeting. Alternatively, the trustees could appoint one of the trustees elected at the previous annual general meeting, who was not re-elected for the next term, and who doesn’t have time to act as a permanent trustee, but who is happy to assist as replacement trustee as the need arises. This appointment has the benefit that the replacement would have knowledge of day-to-day management requirements as well as existing and possible future projects of the body corporate.

Another possibility is for the trustees to appoint an objective, qualified and experienced third party such as an accountant, lawyer or engineer. It may be that these outsiders are not members of the body corporate and that they require remuneration for their time. PMR 8(3) states that trustees who are not members may be rewarded for their services as such; provided that any reward, whether monetary or otherwise, must be approved by a resolution of the body corporate as part of the budget for the schemes administrative fund.

How long is a replacement trustee appointed for?

Finally, a replacement trustee must be appointed for a specified period. That period would be the time that the trustee is absent or unable to act. It cannot be for the rest of the year until the next annual general meeting.

In those circumstances PMR 7(5) and (6) state that in circumstances where a trustee ceases to hold office the remaining trustees, or the members in general meeting, may appoint a replacement trustee. Such an elected or replacement trustee holds office until the end of the next annual general meeting and is eligible for re-election if properly nominated.

Conclusion

It is important that when trustees have meetings or make decisions that they maintain the number of trustees that the body corporate decided there be. When a trustee is absent or unable to participate a replacement trustee serves to maintain the body corporate number of trustees.

WRITTEN BY CARRYN DURHAM