May and June of each year tend to be “annual meeting season” for our cooperative and condominium clients. At such meetings, the shareholders of cooperatives and unit owners of condominiums elect their board of directors or board of managers. Those who serve on boards are hard working volunteers, participating on a weekly if not daily basis. Those who attend annual meetings may only attend one meeting a year to question and judge those who participate on their behalf on a constant basis. This blog post will address how to properly conduct annual meetings and why smoothly run annual meetings are important. Although our law firm also conducts annual meetings for condominiums and religious corporations, this post will be limited to cooperative corporation annual meetings.
Why do we have annual meetings? Such meetings are necessary to elect directors at regular intervals, so that the same people do not maintain their posts indefinitely contrary to the will of shareholders. An Offering Plan would have been filed by the sponsor of the cooperative with the New York State Attorney General Real Estate Finance Bureau when the building was converted to cooperative ownership. One of the documents contained in such Offering Plan is the By-Laws. As in any corporation, the By-Laws provide the roadmap for the governance of the corporation. It is common for By-Laws to provide that annual meetings for the election of directors are to be held in a particular month of a year. The cooperative need not hold its meetings in the specific month stated in the By-Laws (who wants to meet in January during a blizzard), it merely needs to hold its meetings at regular intervals each year. The By-Laws specify that the notice of annual meeting is to state that the business to be conducted is to elect directors and to conduct other business specifically identified in the notice, should state the time, date and place of the meeting, and who needs to sign the meeting notice. Our attorneys also pay careful attention to each client’s By-Laws provision regarding the number of days required for the advance notice of the meeting. Usually cooperative By-Laws require that written notice of the annual meeting be delivered at least “x” days but no more than “y” days in advance of the meeting. The By-Laws will also indicate how many directors are to be elected and if there are particular disqualifications (such as a director must also be a shareholder).
Once the meeting commences, the first step is to determine if there is a quorum, the proper number of shares represented for the decisions made at the meeting to be legally valid. The By-Laws identify how many shares constitute a quorum, perhaps a majority of shares issued or a majority of units are represented. Usually, shares can be represented by attending in person or by proxy (the delivery of a signed document instructing how one’s shares are to be voted or who may vote one’s shares on her behalf). It should be noted that certain legal acts or acts as identified by the certificate of incorporation may have a more stringent definition of quorum than the standard director election. As it is inconvenient to adjourn the meeting due to failure of quorum requirements, we encourage our clients to collect as many proxies as possible in case a shareholder cannot attend.