In this video, Tom Robinson, Associate at OMB Solicitors within the Body Corporate team talks about the different types of resolutions that may be considered at General Meetings including how they are calculated and when do they apply.
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Transcript
Hi, I’m Tom from OMB Solicitors, I’m an Associate here in our body corporate team and today I thought we’d talk about general meeting resolutions, what are they? Which ones? How many do we have? When do they apply, and also how do we calculate them?
But I also wanted to touch on poll voting as that tends to form part of the types of resolutions that are considered at a general meeting. Now, it may seem like a simple topic, the general meeting resolutions and the types that we have, but I do get quite a few queries from lot owners and committee members about when those types of resolutions apply, but also how they’re appropriately calculated and I guess the reason we tend to get a lot of these queries is when there obviously is a disputed motion.
So how many of these resolutions do we have for a general meeting? Keeping in mind that a general meeting is either your annual general meeting, which must be held once a year, or an extraordinary general meeting which can be called at any time throughout a body corporate’s financial year. There are four types of resolutions for a general meeting.
The first and the most common is an ordinary resolution. The second that we tend to hear about more commonly is a special resolution. Then we have resolutions without dissent, and the most uncommon resolution being a majority resolution.
So starting with an ordinary resolution being our simplest form of resolution, it is our starting place for all general meeting resolutions is put at an AGM or an EGM. Specifically, you start with any motion that goes to a general meeting being an ordinary resolution, unless the legislation specifically states otherwise.
So, an ordinary resolution applies to pretty much anything unless it’s specifically stated otherwise and it’s calculated by determining that there are more yes votes than no votes. So pretty simple, if we use a basic example of 20 people vote on a motion, we need 11 or more votes in favour of the motion for it to pass.
Moving on to resolution without dissent, this is a type of motion that cannot have a single dissenting vote against it. So using our example of 20 people vote on a motion.
Now, extensions don’t apply to any motions, they are not calculated, they are recorded that an owner has decided to not vote on a motion, but they do not go towards yes or no votes, and assuming that all these votes are valid, if we look at a resolution without dissent and 20 people vote on the motion, you’ll need all 20 of those votes to be in favour of the motion.
If you have a single dissenting vote, the motion will fail. So when do our resolutions without dissent apply? Is the most common time is when we are recording the allocations of exclusive use or long term leasing or licensing of areas or the whole of common property.
That disposal of common property will require a resolution without dissent and of course, our legislation specifically states when a resolution without dissent is required for those types of matters.
One important thing to remember about a resolution without dissent is that even if a lot owner is unfinancial, keeping in mind that if an owner is unfinancial, they are restrained from exercising their vote, but on a resolution without dissent, they can actually exercise a vote.
But it’s the only time that they can exercise it whilst they’re unfinancial and only if it is a resolution without dissent. So that moves us on to majority resolutions, sounds very similar to ordinary resolutions, but is actually quite different.
It’s also the most uncommon type of resolution we come across, and it’s really only used in very, very limited circumstances. The most common circumstance that it is used is when a letting agent is transferring its management rights.
Now, that’s not a usual sale or transfer of management rights, but rather when the letting agent is transferring its management rights. That requires a majority resolution at a general meeting. Now, to calculate a majority resolution, it requires at least 50 % of the total number of lots of owners entitled to vote, to vote in favour of the motion.
So sounds pretty confusing when we say it out loud like that. But basically, if we take an example of having 20 owners vote on the motion, we need at least 50 % of the lots to vote in favour of it.
So let’s say the scheme is 20 lots, or let’s say they’re 50 lots actually, let’s say we’ve got a 50 lot scheme, but only 46 lots by way of their owners can vote on the motion, assuming, let’s say in this example, four of those owners are either unfinancial or haven’t submitted their corporate company nominee forms, then you need at least 50 % of the total number of lots entitled to vote being 46.
So in this instance, we’d need more than 50 % of 46 being more than 24 votes in favour of the motion. That is how we determine a majority resolution, now, that doesn’t matter how many dissenting votes there are, even if there are none, you still need to have more than 50 % of the total number of lots.
So the main difference here between a majority resolution and an ordinary resolution is we’re talking about lots in a majority resolution versus the actual votes cast in an ordinary resolution. That now leads us on to special resolutions.
Now, the reason I’ve left this one last is because it is generally the most complicated one to calculate, mostly because there’s three aspects to it, and each of those aspects must be achieved in order for the motion to be passed.
A special resolution is most commonly used when we record a new CMS recording new bylaws. Now, that’s not recording exclusive use bylaws as that requires a resolution without dissent, but just your general day to day bylaws. How do we calculate it? There are three aspects, as I said. We’ll use an example of a hundred lot scheme this time.
The first aspect is you must have two thirds of all votes cast in favour of the motion. The second aspect is you cannot have more than 25 % of the number of lots voting against the motion, and the third aspect is you must not have more than 25 % of the combined contribution lot entitlement of the dissenting votes being more than 25 % of the total contribution and entitlement for the entire scheme.
Now, I’ll explain that through the next example using 100 lots. So looking at the first aspect and our 100 lots example, let’s say 50 votes were cast in the motion. So if another 50 owners didn’t vote, only 50 out of 100 lots voted on the motion. We need two thirds of 50 votes to be cast in favour of the motion, so we need 34 or more votes in favour of the motion.
If we get that, that’s the first aspect ticked. The second aspect is we can’t have more than 25 % of the number of lots. Now, again, we’ve shift from votes cast to lots. So 25 % of 100 lots is 25. So we can’t have more than, in other words, 26 in this example, votes against the motion.
Assuming we don’t get that again and we’ve ticked that requirement, the last one is the contribution requirement. What we need to do is we need to calculate the combined contribution lot entitlements for all dissenting votes, if there are any, and make sure that that total combined contribution of those dissenting votes do not total more than 25 % of the scheme’s contribution total.
As a real basic example, let’s just assume that this 100 lots scheme, all 100 lots have an equal contribution of one. Then again, you couldn’t have more than 26 %… Sorry, 26 contribution lot entitlements totalling the dissenting votes cast against the motion.
So it can be quite a complicated resolution to calculate. I also hear quite a few variations of a special resolution, I hear the 75 % rule and other aspects for three quarter rule, which is actually quite incorrect. So it’s important to know not only how we calculate this motion, but obviously when it also applies.
Those are the four types of resolutions. What also sometimes complicates matters even more is when we’re at a general meeting and someone decides to put their hand up when a motion has failed and they say, I want a poll vote.
So what is a poll vote? When can it apply and how is it exercised and calculated? So a poll vote can only be exercised on an ordinary resolution, so our most common resolution, as long as it is not by secret ballot.
So it has to be an open ballot, ordinary resolution motion, and the person who requests the poll vote must not only be entitled to vote on motions at that meeting, but they must also physically be present at the meeting.
Now, the way that it’s calculated is to whether or not a poll vote will overturn a motion. Use an example, again, of 20 lots, if a motion is defeated because there was 12 no votes versus eight yes votes, if one of the owners who are in the minority being one of the eight owners who voted yes, request a poll.
If the eight owners who voted yes, if their total combined contributions are more than the total combined contributions of the 12 owners who voted no to the motion, then the motion will actually be overturned and deemed passed. So the poll vote can also put a bit more of a spanner in the works when we have our general meetings, especially when we’re dealing with the different types of resolutions.
But if you ever have any questions about your resolutions, when they apply, how they’re calculated, and some of them are complicated, please do not hesitate to contact myself or another member at OMB Solicitors, and we’d be pleased to help.