Buying And Living in a Multi-Unit Development Property in Ireland
15. Management Company Bank Accounts
15.1 Introduction
As the monies paid by owners in their service charges can be substantial, most management companies opt to manage their finances via bank accounts.
Typically, the developer will have established the management company's bank accounts when the company is first set up.
There may be instances for example, where the directors of the company wish to establish a separate bank account for a sinking fund if none is already in place, switch accounts between banks, or change the persons authorised to access the accounts.
In such instances it may be necessary for the directors to review current procedure and consider how the management company's finances can be best maintained and managed.
15.2 Considerations before opening a bank account
It is considered good practice for the directors to open and operate separate bank accounts for service charges (current account) and the sinking fund (interest bearing account).
These accounts should be operated in the name of the management company and not any named individual.
The management company's finances should not be administered through any individual's personal bank account.
Banks, building societies, credit unions and An Post provide deposit and current accounts options.
There are many types of accounts available and the financial institutions offer various options in relation to these accounts. In deciding what sort of account would suit the company best you should think about the way the company will use the account.
It is advisable to speak to the financial institutions about what the company will need and you should shop around for the best interest rates and fees and decide which suits your company's purposes and needs best.
Our consumer financial information website itsyourmoney.ie provides independent information on bank accounts.
15.2.1 Operation of the bank account
The directors should, in the first instance consider who currently has authority to access the management company's accounts and assess how well the current process is working.
The directors may wish to authorise the bank to allow the managing agent to use the management company's service charges account to pay day to day bills in relation to services provided.
Any arrangements in this regard should be clearly set out in writing between the management company and the agent.
The directors should also consider what safeguards they wish to put in place as regards lodgements and withdrawals from the company's bank account.
Use of the company's bank accounts should be clearly governed by establishing:
- A limit to the amount that the directors or any authorised person such as a managing agent can withdraw for goods or services without convening (calling/organising) a directors or management company meeting (e.g. no one withdrawal may exceed 50% of the annual budget);
- If the bank should act on the signature of any one of the directors or should cheques (perhaps above a certain limit) have to be co-signed by at least two or more directors? If the managing agent is to be authorised for withdrawals from the accounts, a financial limit on the maximum amount which can be withdrawn by the agent should be established;
- Who is to have custody of the management company's chequebooks, deposit books, bank statements and where will they be kept?
15.3 General procedure when opening a bank account
A limited company needs to pass a resolution of the board of directors to open a bank account.
In summary, some of the key steps the directors may be required to take when opening a bank account for the management company are:
- Hold a meeting of the directors of the company to decide the criteria on which the bank account will operate;
- Decide who is authorised to sign cheques on behalf of the company, and how often the company wishes to receive statements;
- Request from the bank a bank mandate form. This authorises the bank to carry out the instructions of the directors regarding the operation of the account; Complete and return the mandate form and signatures to the bank;
- Provide the bank with a copy of the company's Memorandum and Articles of Association and Certificate of Incorporation and details of the company's officers;
- When the account is being opened, the directors and persons authorised to sign any transactions on the company accounts may need to go to the bank and provide identification such as a passport, and a utility bill;
- Lodge money into the new account.
To ensure that the company's financial records are accurate and transparent, the company secretary should carefully retain all documents issued by the bank in relation to the operation of the company's account.
Bank documents will include for example, bank statements, cheque stubs (which should be properly and fully completed), lodgement slips and any other correspondence from the bank.