This article discusses whether a committee can invest owners corporation funds and when a special resolution is required.
Question: Can the committee make the decision to invest owners corporation funds or does this require approval by a resolution?
Our Executive Committee has placed funds in term deposits. Is this defined as an investment under UTMA section 69(1) and can the Committee decide to invest, or does this require approval by a resolution of the Owners Corporation? Should we have a special resolution to ‘direct’ where any investments are to be made?
Answer: Provided there were no such directions in place at the time the executive committee invested the funds in a fixed deposit, the decision to make such an investment would be valid and effective.
Gary Bugden, Budgen Allen Graham Lawyers:
A general meeting may:
- by a resolution, direct the executive committee about the way it exercises its functions; and
- by a special resolution, direct the way in which the owners corporation invests its money.
Provided there were no such directions in place at the time the executive committee invested the funds in a fixed deposit, the decision to make such an investment would be valid and effective (subject, of course, to any fatal procedural defect in the passing of the resolution).
If owners want more control over the investment of funds, then the proper course would be to pass a special resolution directing the type of investment that the owners corporation can make. The executive committee would then be bound by those directions. Section 69(1) itself does not define the type of investments that can be made. That is left to the special resolution passed pursuant to that section. Finally, no matter how it is authorised, the owners corporation cannot invest in a mortgage of land. That is an absolute prohibition.
This post appears in Strata News #554.
Gary Bugden
Bugden Allen Graham Lawyers
E: gary@bugdenallenlawyers.com.au
P: 02 9199 1055
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