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A Conversation About: Board Members’ Rights to Read Contracts
New Bd Member
I am a new board member and have been informed by our managing agent that I am not permitted to see copies of building-related contracts without the full board’s permission. I find nothing in the bylaws or the proprietary lease to support withholding building-related contracts from a board member. The managing agent bases his claim on Business Corporation Law 624(b), which as I read it is directed solely at shareholders – not board members. Any insight would be greatly appreciated.
I would think that as a board member you should be permitted, in fact responsible to, see these contracts. Something is fishy here!
New Bd Member
Thanks, Jeff Lee. I’m smelling something as well. I’ve looked into New York State laws and find that BCL 701 says: “The business of a corporation shall be managed under the direction of its board of directors.” I also know that I have taken on a fiduciary duty to protect the interests of the shareholders. I am unable to see how I can fulfill those two duties if building-related contracts are withheld from me. I intend to make my case to the board. I’ve also engaged an attorney on the question of whether board permission may legally be required. I’ll post the results. Thanks again.
I suggest you keep fighting for your rights. Do not allow the management or the board to bully you into being blindsided in your investment. You as a shareholder have the right to make sure your investment is handled properly. If contracts and financials are being hidden from you, then something is wrong. Get an attorney to review your black book and BCL. I am sure there is a clause in there that gives shareholders the right to inspect books at any time during normal business hours. If management give you a hard time, do yourself and the building a favor and take them to court. Get an index number on file so if they pull anymore nonsense you can always open your case with the same index number, and subpoena the records you want. Good luck. Don’t give up the fight, or you will lose everything you invested in.
I don’t believe it to be true...but I want to know why wouldn’t the board give their permission anyway. Also, remember the managing agent works for you; you do not work for them.
New Bd Member
Thank you for taking the time to reply, Phyllis. It remains to be seen if the board will give permission. On our board, it seems that the managing agent is running the show. I ask a lot of questions, and the managing agent doesn’t seem to like that.
The Alliance of Condo & Co-op Owners is aware of essentially no circumstance in which the right of a board member to review contracts – or any other corporate documents – is legitimately constrained. Indeed, any attempt to impose such restrictions is often the first sign of serious trouble, and we advocate prompt action. The apparent misapplication of a BCL provision that is, indeed, directed at shareholders would be comical if it weren’t so serious. We’re not attorneys, but would like to discuss the particulars of your situation; contact us in confidence: firstname.lastname@example.org
As a board member, you should be able to read all contracts and each month must get a monthly financial statement. All board members must review and agree to all contracts before signed. As a board member, you will be responsible for any misappropriation of funds and misconduct in the building, so how can the management refuse you your rights to the running and approval of all management tasks conducted? It can’t and shouldn’t. If I were you, I would get other shareholders together and take the management and the board principals to court and subpoena the records. I did and won.
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