New York's Cooperative and Condominium Community
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A guide to elections, proxies, and other concerns.
Attorney Bruce Cholst explains the primary purposes of an annual meeting, as well as how to avoid contention at yours.
A guide to elections, proxies, and other concerns.
The manner in which an annual meeting is conducted can make or break a new board. It is therefore imperative that both the legal formalities and the political niceties be scrupulously observed. There are ways to conduct a smooth, harmonious, productive, and legally valid meeting so that the board can begin its term without controversy, chaos, and litigation.
The annual meeting has three separate and distinct purposes: (a) providing owners with an update on the building’s operation over the preceding year; (b) conducting whatever votes are scheduled to occur, namely board elections and consideration of amendments to the association’s governing documents; and (c) providing a forum for owners to ask questions or vent. A board’s ability to comply with all pertinent legal requirements while simultaneously navigating these three disparate aspects of its annual meeting efficiently and with diplomacy will determine whether the aftermath will be smooth or chaotic.
Timing and Proxies
The first legal requirement with which boards must be concerned is the nature and timing of the notice of meeting. This notice must be in written or electronic format, and is required to state the place, date, and hour of the meeting. The association’s bylaws typically require that any such meeting must be held in the county where the building is located.
Many association bylaws also specify a date on or by which the annual meeting is to be held. While courts do not strictly enforce such a deadline, the Business Corporation Law provides aggrieved shareholders with a remedy in the event a board unduly delays sending a notice of the meeting.
The notice may not be served more than 60 or less than 10 days in advance of the meeting. It may be hand-delivered to the owner (sliding under the apartment door is unacceptable) or mailed to his/her official address or, if the owner has authorized electronic service, delivered in that manner. The date and method of service of notice must be documented with an affidavit by the person who effected same. Untimely service or improper notice is sufficient in and of itself to expose the results of any annual meeting to legal challenge.
Notice of the annual meeting is typically accompanied by a proxy form enabling owners to designate others to vote in their place in the event they are unable to attend the meeting. (Proxy forms can either give the designee discretion to vote for whomever he wants or instruct the designee how to vote at the meeting.)
There is no legal requirement that the board provide owners with a proxy form. However, the more “user-friendly” a board makes its annual meeting package (i.e., by providing a proxy form and a letter of explanation, and possibly the names of all known candidates for board seats and their resumes), the less vulnerable to criticism it will be.
Atmospherics matter when it comes to planning and executing an annual meeting. The choice of timing and venue, the provision of amenities or failure to do so, and the manner in which information is presented all profoundly affect the tone of the gathering.
For example, if the board wishes to maximize turnout and avoid accusations that its timing was politically motivated, the meeting should be scheduled for 7 to 7:30 P.M. on a weeknight so that owners are likely to be in town and afforded adequate opportunity to arrive home from work. Moreover, meetings should not be scheduled during the months of July, August, and December or during holiday weeks, to minimize the prospect that owners will be on vacation.
Selection of a venue is equally crucial for establishing the tone. Proximity to the building will encourage attendance and preclude complaints about the board’s lack of good faith in scheduling of the meeting. A gathering in a shareholder’s apartment or a building lobby is much less formal than if the meeting were scheduled in a hotel conference center, church, or school auditorium, and therefore may lend itself to a more casual dialogue.
However, this may be an undesirable or impractical choice of venue if a contentious gathering is anticipated. One of my buildings with a history of divisive annual meetings held its 2010 get-together amid the stacks of books in a library. The calming influence of this venue had a perceptible impact upon the tone of the gathering. However, the choice of forum does not guarantee harmony; one of the most hateful annual meetings I ever attended was held in a Quaker meeting hall.
Comfort counts when conducting an annual meeting. A crowded room without appropriate heat, ventilation, air conditioning, or adequate seating arrangements is guaranteed to inhibit dialogue and increase tension. Acoustics also matter. If the meeting is being held in a large room, microphones are a must, and the board or managing agent should test them in advance to make sure they are functional. Every effort should be made to procure hand-held microphones (in addition to those used by the board) to distribute among the audience during the question-and-answer period. I have also found that one way to reduce tension is to provide food (soda, coffee and milk, pastries, finger sandwiches) while people are waiting for everyone to be signed in.
The board’s choice of who presents its information to owners also affects the tone of its annual meeting. Presentations by board members instead of the building’s various professionals (accountant, attorney, engineer/architect, designer/decorator, property manager) results in a less formal atmosphere. On the other hand, professional presentations lend a more ritual milieu to the meeting, which may be appropriate to a particular building. You should choose what works best for you.
Many boards seek to impress their communities by staging a “road show,” complete with the full array of professionals at the annual meeting. Sometimes, circumstances warrant the presence of a particular professional, such as an engineer, architect, or decorator to explain a controversial capital project, an accountant to describe disconcerting financial statements, or an attorney to dispel concern over controversial legal issues. Presentations by local police and fire department representatives or politicians concerning community issues can also lend substance. In the event controversy arising out of the annual meeting is anticipated, the presence of a stenographer to document who says what at the gathering may be prudent.
Board members should also consider when planning for an annual meeting how detailed they want their reports to the community to be, and whether the use of props such as charts or Power Point presentations is warranted. Lengthy and numerous presentations tend to cut into the time available for owner Q&A/gripe sessions. Finally, distribution of financial statements at least several days prior to the meeting is imperative. Nothing in my experience engenders more anger by attendees than a discussion of the building’s financial situation without having been given the opportunity to analyze a written profit-and-loss statement in advance.
Association bylaws typically state that the president presides over annual meetings. While the president may delegate that job to another person, it is not generally a good idea to cede the role to a non-board member. A recording secretary should be designated at the outset of the meeting, since minutes of all annual meetings is required by law.
A quorum of shareholders or unit-owners must be present either in person or by proxy for the annual meeting to be legally binding. The specific quorum requirement is set forth in the association’s bylaws: in a co-op, it is typically 50 percent plus 1 of the corporation’s outstanding shares; in a condo, it is typically 50.0001 percent of the association’s common interests. However, particularly in newer condominiums, bylaws often provide for a lesser percentage of ownership presence as the requisite quorum.
The reason annual meetings often take so long to get under way is that the board is waiting to see whether a quorum is going to appear before beginning the proceedings. However, such a delay is not necessary since the only official legal business of the meeting and therefore the only thing for which a quorum is required is the voting. Thus, the gathering can begin promptly with the updates of the building’s operation and then proceed to the Q&A/gripe session. If a quorum has still not been obtained by the end of that, the meeting can be adjourned, with the voting being postponed to a future date.
The generic agenda for an annual meeting, as typically specified in association bylaws, divides the gathering up into four basic parts: formalities designed to comply with arcane legal requirements; presentation of informational reports; voting; and the Q&A/gripe session, referred to euphemistically as “unfinished business” or “new business.”
The formalities include convening the meeting; registering the proxies and votes represented by those who have signed in to determine the existence of a quorum (referred to as “roll call and presentation of proxies”); making the affidavit of service of the notice available for inspection; and reading the minutes of the previous meeting (or waiving that reading by vote of the owners personally present).
Assuming there are more candidates than open seats on the board, the electoral process includes formal nomination of candidates; candidate speeches (although this is not a legal requirement); appointment of inspectors of election to tabulate the ballots and proxies and formally certify the election results under oath as required by law; an explanation of the voting process (i.e. straight voting or cumulative voting); and the actual tabulation by the inspectors (which may or may not take place and/or be announced at the meeting).
When voting on proposed governing documents is also on the agenda, such proposals are typically debated by designated proponents and opponents, who are each allotted a specified time period for argument, and the vote is tabulated and certified by inspectors separate and apart from the board election.
Once all of the business on the agenda is concluded, the meeting chairperson entertains a motion for “adjournment,” and the closing gavel is sounded. See you next year.
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