We have received a number of COVID-19 related inquiries from cooperative and condominium boards asking about how to deal with annual shareholder and unit owner meetings that their bylaws state should be held in the next few months.
There are a number of options:
- The simplest, most straightforward option is to postpone holding the meeting until conditions improve and “social distancing” is no longer an issue. The NY Business Corporation Law contemplates that a corporation may fail to hold an annual meeting when required under its bylaws, and provides that, except in very special circumstances, doing so is without consequence. The current directors continue in office and the board has all of its normal powers until a meeting is held. By extension, the same principle should apply in condominiums.
- A second option is to hold only a “token” meeting, attended completely by proxy. Shareholders and unit owners would be given a notice of meeting, perhaps designating a board member’s apartment as the nominal meeting location, but be told that the notice is merely a legal formality and that all shareholders or unit owners are expected to attend by proxy. Prior to the notice, whatever established procedure the building has for soliciting board nominations would be followed, or, if there is not an established procedure, one would be implemented. Then, along with the meeting notice, shareholders would be provided with a directed proxy that they would use to vote for specific candidates for the board. The board might also contract with a service provider to enable the submission of non-paper proxies online. Note that his option may not be satisfactory if there are issues to be voted on other than the election of directors, and those issues warrant discussion.
- Another option is to hold a purely “virtual meeting”. Purely virtual meetings are not normally permitted in New York. Because of an amendment to the Business Corporation Law this past October, New York corporations are permitted to allow shareholders to attend a meeting online, ask questions and cast their votes confidentially while the meeting is in progress, but only if online attendance is coupled with an actual physical meeting. However, in one of his recent emergency proclamations, issued on March 20, 2020, Governor Cuomo suspended the statutory requirement that annual meetings be associated with a physical place. There are significant limitations. Unless extended, the proclamation is only effective until April 19th. Most building bylaws call for a physical meeting notwithstanding the suspension of the statutory requirement. Staging a virtual meeting typically requires identifying and engaging a service company, most of which cater to public companies. Finally, boards should be sensitive to the fact that, although we are entering the third decade of the 21st century, a significant number of owners may not be capable of attending an online gathering.
Regardless of whether or by what method boards decide to hold annual meetings, nothing precludes them from keeping owners informed of the state of the cooperative or condominium. Financial statements can, and should, be distributed at the customary time, accompanied, perhaps, by “state of the building” memoranda. There are also a number of inexpensive, or free, software solutions available, like Zoom, which would enable buildings to hold virtual “town halls” without board members or owners ever leaving their apartments.
If you would like assistance with any of the foregoing, please contact a member of our Cooperative and Condominium Practice Group.