The job of secretary on a co-op or condo board is not known for its glamour. After all, taking the minutes at board meetings has never won any literary prizes. But the state’s new conflict-of-interest law – which requires annual reporting of all board votes on contracts in which a director has a financial interest – has turned every board’s secretary into a very important player.
“Secretaries should be reminded to keep good records,” says Peter Massa, a partner at the law firm of Gallet, Dreyer & Berkey. “If a board is voting on one of these contracts, the secretary should keep detailed records of all voting. If the contract isn’t approved, the vote doesn’t have to be disclosed in the annual report.”
Secretaries – and all fellow board members – need to realize that the law’s requirements are stringent. The annual report must list all contracts or transactions that were voted on by the board with an entity in which a director has a financial interest. The report must be signed by all directors and include information on the amount and purpose of the contract, the recipient, a record of the meetings of the directors in which the contract was voted on – including attendance and how each director voted – plus the date of the vote and the effective date of the contract. Even if there were no contracts involving interested directors, that fact must be disclosed. The report must then be distributed to all shareholders or unit-owners. Much of this workload will land on the shoulders of the board secretary.
“The detail of the required disclosures might seem a little onerous,” says David Berkey, another partner at Gallet, Dreyer & Berkey. “If you don’t keep detailed records as you’re voting on a contract, you’ll have to reconstruct the voting.”
The law went into effect January 1, 2018, which means that any board that has not yet prepared and distributed its first annual report needs to get busy.
“If boards are behind, they need to get their act together,” Berkey advises, adding that while the law sets no monetary penalties for boards that fail to meet the annual deadline, there’s a compelling reason for boards to comply in a timely fashion: “Someday a shareholder or unit owner will sue because the board is not fulfilling its obligations.”