Introduction
A corporation is a body corporate that comprises of all the unit owners of a particular development. Examples of developments would include apartments, flats, maisonettes, townhouses or office units.
Under the law, a corporation is registered at the Ministry of Lands and not at the Companies Registry, at the time of registration of the sectional plans.
By default, all the unit owners within a development make up the membership of a corporation.
The Sectional Properties Act of 2020 and the regulations thereof make it mandatory for formation of corporations which serves to safeguard the interests of the purchasers of various developments through their inclusion and involvement in the management and running of a development, independent from the developers as was witnessed previously.
Functions of a corporation
1. Management and administration of the common areas
To cater to harmonious living and adherence to various regulatory requirements, corporations work to ensure that the administration of common areas is appropriately enforced. Through its board of management, a corporation can ensure that:-
· The building of a particular development is appropriately insured as required by law and further that insurance premiums are paid on time. For instance, a corporation may take out a fire insurance policy to ensure that the development and all other improvements are safeguarded in the event of a fire breaking out.
· Common property and common areas are at all times kept in a good state of repair. Due to the public nature of common areas such as walking bays, parking spaces, the gym etc., such areas are susceptible to wear and tear and should be frequently maintained for their durability and general enjoyment of everyone.
· Service charge is collected on time and effectively administered.
· Adherence to the by-laws of the corporation is strictly followed by members.
2. Exists and operates as a distinct legal entity
Corporate bodies in general exist as independent legal entities. This means that a corporation exists and is recognized as a legal person, separate from the owners of the units in a building complex. The advantage of this include the following: –
A corporation is capable of suing and being sued
Since a corporation exists as a legal person, it may be sued by any party that may feel aggrieved by its action or the actions of its occupants. The separation of liability from an individual to a corporation ensures that the individual owners of the various units do not bear the personal burden of any lawsuit that might be meted out against the corporation.
Further, a corporation is better suited and might contain more resources necessary for instituting or defending any suit that may be initiated against it.
Perpetual succession
As a body corporate, corporations can exist outside the being of its shareholders. This means that its existence upon formation will not be dependent on the existence of its members. Members can exit the corporation either through the sale of their unit, death or other occurrences and such separation will not render the corporation unable to go about its operations.
It is important to note that a corporation formed for the purpose of managing development property is not authorised to engage in trading activities.
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