|Written by Me Sébastien Fiset , LL.B., B.A.A.|
|Dimanche, 26 Septembre 2010 21:36|
DISTINCTION BETWEEN THE BOARD OF DIRECTORS AND
THE GENERAL MEETING OF CO-OWNERS
Contact the author : firstname.lastname@example.org
According to the terms of article 331 C.c.Q., the legal persons operate through their bodies, which are the Board of Directors and the General Meeting of its members.
According to the law, the syndicate of co-ownership (legal person) is made up of two (2) decision-making bodies ensuring its viability: the Board of Directors and the General Meeting of Co-owners. Their powers are generally divided between them as follows:
Be careful! At the end of the day it is the Declaration of Co-ownership which dictates the distribution of powers and duties between the directors and the general meeting of co-owners.
FIRST BODY OF THE SYNDICATE: THE BOARD OF DIRECTORS
The Board of Directors « is considered mandatory » and the first decision-making body of the syndicate (art. 321 C.c.Q.). It is made up of directors.
Each member has one vote during a meeting of the Board of Directors.
Whether or not there are management positions (president, vice-president, secretary, treasurer or others), the decisions of the board of directors are taken by the vote of the majority of its members (art. 336 C.c.Q.).
Other than presiding over the meetings of the Board of Directors, the President does not have more power or responsibility than any other member. Therefore, he cannot take any decision unilaterally, without the prior consent of the majority of the votes of the board of directors. Meanwhile, it is established that the President holds the deciding vote in the event of a tie vote (art. 336 C.c.Q.).
As a rule, the directors are elected during the annual general meeting of co-owners (art. 338 C.c.Q.).
Article 339 of the Civil Code civil of Québec stipulates that: « The term of office of directors is one year; at the expiry of that period, their term continues unless it is revoked. » However, this article is not of public order. It is therefore possible to make an exception using conventional procedures.
The Declaration of Co-ownership will define in detail the conditions of eligibility. For example, we sometimes see in a Declaration of Co-ownership a condition to the effect that members of the board must be co-owners in residence, however, nothing prohibits, unless otherwise stated, that an outside party be nominated as a director. It all depends on what is stipulated in the Declaration of Co-ownership.
The nominations of the Directors should immediately be reported in the Declaration of Registration of the syndicate in the Enterprise Register. Costs are involved. Any changes throughout the year should be transmitted to the Enterprise Register without delay by means of an Amending Declaration and once a year the syndicate is responsible to produce an Annual Declaration.
In the event that no one volunteers to fill the position of director: it is the responsibility of the Court to name one; costs will be incurred (articles. 391 and 1084 C.c.Q.). A hint to avoid this situation: remunerate the directors and use the legal process of the general meeting of co-owners to present this and to set the amount.
Contrary to popular belief and actual practice, it is not the responsibility of the general meeting to create the management positions of the directors (art. 335 C.c.Q.). Unless it is specifically detailed in the Declaration of Co-ownership to do this, the members of the Board of Directors may or may not, at their discretion, name a president, vice-president, secretary, treasurer or other. It is not an obligation.
Providing they do not contravene the Declaration of Co-ownership, the directors may sign written resolutions which would have the same validity as a decision which was adopted in the meeting of the Board of Directors:
« Resolutions in writing signed by all the persons qualified to vote at a meeting are as valid as if passed at a meeting of the board of directors, at a general meeting or at a meeting of any other organ.
A copy of the resolutions is kept with the minutes of proceedings or the equivalent» – Article 354 C.c.Q.
Furthermore, the directors may choose the format of their meetings from several options (e.g.: by telephone conference or video):
« If all the directors are in agreement, they may participate in a meeting of the board of directors by the use of a means which allows all those participating to communicate directly with each other. » – Article 344 C.c.Q.
The Board of Directors manages the current business of the syndicate. It fulfills and executes the responsibilities of management: daily administration, management of financial operations, decisions regarding maintenance or repairs to the building.
According to the terms of article 335 C.c.Q.:
« The board of directors manages the affairs of the legal person and exercises all the powers necessary for that purpose; it may create management positions and other organs, and delegate the exercise of certain powers to the holders of those positions and to those organs.
The board of directors adopts and implements management by-laws, subject to approval by the members at the next general meeting. »
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The Board of Directors may delegate, in full or in part, the daily administration of the co-ownership to a designated person or to a manager of co-ownership. It may also create management positions and other bodies (art. 335, 343 and 1085 C.c.Q.).
With regard to the Board of Directors, as defined in the terms of article 1084 C.c.Q., it is the Building By-laws which determine:
i) The number of administrators;
ii) The procedure for nomination (either by election at the general meeting of co-owners, by specific nomination in the Declaration of Co-ownership or a combination of these different options. In certain co-ownerships consisting of several co-owners, it could be anticipated that the co-owners rotate the responsibility.) ;
iii) When the nominations will take place ;
iv) Election procedures ;
v) The criteria for eligibility ;
vi) Instructions for replacing a director [vacation, resignation, death, incapacity, etc. (art. 339 and 341 C.c.Q.). A director may not be represented by proxy at a meeting of the Board of Directors];
vii) Instructions for remuneration (if necessary, the general meeting of co-owners will debate);
viii) The term for which the administrators have been nominated.
Legal Obligations imposed on the Directors:
– « Act with prudence and diligence (…) honesty and loyalty in the interest of the legal person. » (article 322 C.c.Q.);
– Ensure a sound management of the syndicate (art. 342 C.c.Q.);
– Ensure that the declaration of co-ownership and the Building By-laws are respected (articles 310, 312, 321, 1039, 1080 and 1085 C.c.Q.);
– See to the preservation of the immovable and to the maintenance of the common portions of the immovable (articles 310, 312, 1039 and 1077 C.c.Q.);
– Set annual or special budgets, subsequent to consultation at the general meeting and establish and advise each co-owner of his contribution to the common expenses and the contingency fund, along with the dates when the payments are due (art. 1071 and 1072 C.c.Q.);
– Keep and maintain the registers and official documents of the co-ownership (declaration of co-ownership, contracts, cadastral plan, the plans and specifications of the immovable, the certificate of register of the building, maintenance record, contingency fund study) (articles 342 and 1070 C.c.Q.);
– Take out insurance against usual risks to cover the entire immovable (common portions and private portions) with the exclusion of improvements made by a co-owner to his portion. (art. 1073 C.c.Q.);
– Remit a copy of the Building By-laws to each tenant if the Lessor has neglected to do so, in order that the By-laws be officially enforceable against the tenant (art. 1057 C.c.Q.);
– Convene the general meetings of co-owners (art. 345 C.c.Q.);
– If a director is in a conflict of interest, he must inform the syndicate (art. 324 and 325 C.c.Q.);
– The directors should never mingle the property of the syndicate of co-ownership with their personal property nor may they use any property for their own profit or that of a third party (art. 323 C.c.Q.);
– Act within the limits of the responsibilities conferred on them (art. 321 C.c.Q.);
Obligations GENERALLY imposed on the directors by the declaration of co-ownership:
– Represent the syndicate in civil actions;
– Establish an accounting system of receivables and disbursements (balance sheet, income statement, debts and claims, budget forecast, etc.); 
– Handle banking and placement of investments; 
– Pay the accounts and expenses of the syndicate ;
– Retain professional services as required (accountant, building expert, supplier of products or services, notary, lawyer, etc.);
– See to repairs (such as essential work that a co-owner has neglected to do);
SECOND BODY OF THE SYNDICATE: GENERAL MEETING OF CO-OWNERS
The general meeting of co-owners constitutes the second decision making body of the syndicate. It is made up of a management group (the « officers ») and the co-owners who are present or represented by proxy.
The co-owners exercise their right to make decisions during the general meeting of co-owners. Just as for the directors, the co-owners may proceed by way of resolutions in writing signed by all the persons qualified to vote (art. 354 C.c.Q.).
The declaration of co-ownership should clearly separate the powers and duties of the two (2) decision making bodies (board of directors and general meeting of co-owners), while ensuring that articles 1096 to 1098 of the Civil Code of Québec are respected as to which powers necessarily belong to the general meeting of co-owners.
The Constituting Act of Co-ownership determines the powers and duties of the general meeting of co-owners.
According to the terms of article 1053 C.c.Q.:
« A constituting act of co-ownership defines the destination of the immovable, of the exclusive parts and of the common parts.
The act also specifies the relative value of each fraction, indicating how that value was determined, the share of the expenses and the number of votes attached to each fraction and provides any other agreement regarding the immovable or its private or common portions. In addition, it specifies the powers and duties of the board of directors of the syndicate and of the general meeting of the co-owners. »
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It is essential to have quorum to open the general meeting and before each vote is taken:
« Co-owners holding a majority of the votes constitute a quorum at general meetings.
If a quorum is not reached, the meeting is declared adjourned to a later date, notice of which is given to all the co-owners; 3/4 of the members present or represented at the second meeting constitute a quorum.
A meeting at which there is no longer a quorum shall be adjourned if a co-owner requests it. » – Article 1089 C.c.Q.
[Bold and underlined added]
The number of votes of each co-owner is proportional to the relative value of his fraction of the co-ownership.
A co-owner may be represented at a general meeting by another person to whom he has given his proxy.
A co-owner who has not paid his common expenses for more than three (3) months loses his right to vote (art. 1094 C.c.Q.). He may however continue to attend the general meetings.
OFFICERS OF THE GENERAL MEETING
The officers are elected by the general meeting of co-owners. They form the officers of the general meeting. The following are named: a president, a vice-president and a secretary.
The Declaration of Co-ownership will dictate the details for running the general meeting of co-owners, including specific provisions for limiting the powers of the officers and the length of their mandate. Having said this, following are the general roles of each of the officers:
The President: He directs the discussions and ensures the smooth progression of the general meeting. He acts as « moderator » among the participants (decorum). He will call to order any co-owner who obstructs the smooth operation of the general meeting and may, if necessary, restrict the right to speak of a disruptive person or even have him expelled.
The Vice-President: He acts in lieu of the president, in the event that it is impossible for the latter to act, either to express himself, to vote or is in a conflict of interest with a decision to be taken.
The Secretary: Records the minutes of the general meeting. The Secretary will have the President of the General Meeting sign off on the minutes at the end of the meeting.
A co-ownership with a large number of co-owners may require a scrutineer for the votes taken at the general meeting to assist with the process of voting.
Following are the most useful articles of the C.c.Q. to become familiar with in regard to decisions taken in a general meeting. :
Article 1096 C.c.Q. states that:
« Decisions of the syndicate, including a decision to correct a clerical error in the declaration of co-ownership, are taken by a majority of the co-owners present or represented at the meeting. »
According to the terms of this article, by a vote of the majority of co-owners, the general meeting:
– Generally elect the board of directors ;
– Is consulted on the budgets (annual or special) and makes known its opinion (art. 1072 C.c.Q.);
– Discharges and replaces a director with cause or who has neglected to pay his condo fees (art. 1086 C.c.Q.);
– Corrects clerical errors in the declaration of co-ownership;
Article 1097 C.c.Q. stipulates that:
« Decisions respecting the following matters require a majority vote of the co-owners representing 3/4 of the voting rights of all the co-owners:
1° acts of acquisition or alienation of immovables by the syndicate;
2° work for the alteration, enlargement or improvement of the common portions, and the apportionment of its cost;
3° the construction of buildings for the creation of new fractions;
4° the amendment of the constituting act of co-ownership or of the description of the fractions.
According to the terms of article 1098 C.c.Q. it is state that:
« Decisions on the following matters require a majority vote of 3/4 of the co-owners representing 90% of the voting rights of all the co-owners:
(1) to change the destination of the immovable;
(2) to authorize the alienation of common portions the retention of which is necessary to the destination of the immovable;
(3) to amend the declaration of co-ownership in order to permit the holding of a fraction by several persons having a right of periodical and successive enjoyment. »
Article 1099 C.c.Q. states :
« Where the number of votes available to a co-owner or a promoter is reduced by the effect of this section, the total number of votes that may be cast by all the co-owners to decide a question requiring a majority in number and votes is reduced by the same number. »
Article 1101 C.c.Q. specifies:
« Any stipulation of the declaration of co-ownership which changes the number of votes required in this chapter for taking any decision is deemed unwritten. »
Article 1102 C.c.Q. stipulates that:
« Any decision of the syndicate which, contrary to the declaration of co-ownership, imposes on a co-owner a change in the relative value of his fraction, a change of destination of his private portion or a change in the use he may make of it is without effect. »
Article 335 C.c.Q. states this:
« The board of directors manages the affairs of the legal person and exercises all the powers necessary for that purpose; it may create management positions and other organs, and delegate the exercise of certain powers to the holders of those positions and to those organs.. »
The general meeting of the co-owners has the exclusive and absolute power to modify the declaration of co-ownership within the limits prescribed by law.
GENERAL POWERS OF CO-OWNERS:
According to the law, co-owners:
– Give their opinion on the budgets which are set by the board of directors (article 1072 C.c.Q.);
– Approve the distribution of costs for the alteration, improvement or enlargement of the common portions and the construction, acquisition or alienation of immovables or the construction of new buildings (article.1097 C.c.Q.);
– Generally elect the directors during the annual general meeting of co-owners;
– Approve the management by-laws adopted by the directors (article.335 C.c.Q.);
– May request the convocation of an annual general meeting or special meeting while fulfilling certain conditions (10% of the co-owners) (article 352 C.c.Q);
– May add questions to the agenda and may raise any question of interest, which does not require a decision of the general meeting, to the legal person or its members.
The declaration of co-ownership may add or clarify some of its provisions on the condition that they preserve and not restrict the rights of the co-owners (art. 334 C.c.Q.).
With regard to decisions taken at the general meeting, article 1103 C.c.Q. stipulates:
“ Any co-owner may apply to the court to annul a decision of the general meeting if the decision is biased, if it was taken with intent to injure the co-owners or in contempt of their rights, or if an error was made in counting the votes.
The action is forfeited unless instituted within 60 days after the meeting.
If the action is futile or vexatious, the court may condemn the plaintiff to pay damages. »
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Finally, article 1056 C.c.Q. states that:
“ No declaration of co-ownership may impose any restriction on the rights of the co-owners except restrictions justified by the destination, characteristics or location of the immovable. »
[Bold and underlined added]
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We hope this summary of the existing distinctions between the board of directors and the general meeting of co-owners will be of interest to the reader in order to help him understand the functioning of a syndicate of co-ownership in Québec.
The information provided on this page is general in nature and cannot compensate for the need to obtain legal advice specific to a particular situation.
 See : www.registreentreprises.gouv.qc.ca
 See also article 1087 C.c.Q.
 See also articles 1339 to 1341 C.c.Q.
 Article 1090 C.c.Q.: « Each co-owner is entitled to a number of votes at a general meeting proportionate to the relative value of his fraction. The undivided co-owners of a fraction vote in proportion to their undivided shares. »
 Article 1088 C.c.Q.: « Within five days of receiving notice of a general meeting of the co-owners, any co-owner may cause a question to be placed on the agenda. The board of directors gives written notice of the questions newly placed on the agenda to the co-owners before the meeting.»
 Article 348 C.c.Q.: « No business may be discussed at a general meeting except that appearing on the agenda, unless all the members entitled to be convened are present and consent. However, at an annual meeting, each member may raise any question of interest to the legal person or its members.»
Mise à jour le Samedi, 16 Août 2014 17:19