My Office receives a large number of enquiries about a body corporate’s obligations and options regarding its bank accounts.
As you might expect, legislative provisions around this topic are quite prescriptive, with the aims of maximising transparency of financial management and ensuring that body corporate funds are optimally – and properly – used.
In this article I will endeavour to clarify some of these matters.
As always, this is general information only and is no substitute for qualified legal or financial advice.
Also, for the purposes of this article, I will refer to provisions of the Standard Module. Depending on the regulation module that applies to your body corporate, some of the financial requirements will differ.
A body corporate must have one or more bank accounts kept in its name. The account must be at a financial institution such as a bank, building society or credit union.
An account opened after 4 March 2003 must only be opened with the consent of the body corporate.
This account can be run by:
- anyone authorised by the body corporate (e.g. at least two members of the committee); or
- a body corporate manager or an associate of the manager who is authorised by the body corporate to operate the account.
A body corporate manager cannot make decisions on what and when money is spent from the account and must ensure proper decisions are made before spending either by the:
- body corporate (at a general meeting); or
- the committee (committee meeting or vote outside a committee meeting).
The body corporate can tell the financial institution in writing if the body corporate manager’s engagement has ended. They must complete a BCCM Form 2 – change of signatories form, to change the signatories on a body corporate bank account. This form is available on our website. It might also be advisable to check with the financial institution about any requirements they may have.
The financial institution must not let the body corporate manager operate the account after this notice has been given.
A body corporate can borrow money. The body corporate and the lender would agree on security for the loan.
A decision to borrow money can be decided by ordinary resolution at a general meeting unless the amount to be borrowed is more than $250 multiplied by the number of lots in the scheme. If it is more, a resolution without dissent is needed.
A body corporate can invest its funds in the same way that a trustee may invest trust funds. For more information about this, have a look at the Trusts Act 1973 at the legislation website or seek qualified, professional advice.
Administrative and sinking funds
There are a number of rules on how to manage the administrative and sinking funds, including:
- funds must not be transferred between the administrative and sinking funds;
- payments from the administrative or sinking fund can only be made if there is either:
– a written request for payment; or
-written evidence of payment including for example a receipt
- all payments from the administrative or sinking fund must be made from the financial institution account;
- the administrative and sinking funds may be invested in the way a trustee may invest trust funds; and
- all money received to be credited to the administrative or sinking fund must be paid into the financial institution account held in the name of the body corporate.
Access to the body corporate’s financial institution statements
Sometimes an owner may want to obtain a copy of the body corporate’s financial institution statements. These statements form part of the body corporate’s records. An owner should put their request in writing to the body corporate – being specific about which records they require, and pay the prescribed fee ($0.65 per page).
This is by no means an exhaustive list of a body corporate’s obligations and options regarding financial management, but it does give an idea of what is required and what may be possible for a body corporate to do, in order to best manage its own interests.
For further information about the body corporate legislation please contact our Information Service on Freecall 1800 060 119, or visit our website.
Author: Chris Irons, Commissioner for Body Corporate and Community Management