Once unthinkable, virtual annual meetings in co-ops are beginning to look inevitable during the coronavirus pandemic – and possibly beyond. A new amendment to the Business Corporation Law (BCL) has removed the requirement in many corporate bylaws that annual meetings be held in a physical “location” or “place.”
“That was the biggest obstacle” to virtual meetings, says Julie Schechter, a partner at the law firm Armstrong Teasdale, “because a lot of bylaws say things like, ‘It has to be at any place determined by the board of managers within the borough where the building is located.’ And so if we were to have a virtual meeting, you would in essence be violating the provision which requires a physical location.”
In light of the amendment to the BCL, Armstrong Teasdale put together guidelines on the mechanics of holding virtual meetings for co-ops.
Nominations: Nominations should be publicized well in advance of the meeting together with a “save the date” memo to the shareholders. The board should consider holding a virtual “Meet the Candidates” session in advance of the meeting or requesting personal statements from nominees, which would be circulated to the shareholders.
Notice of meeting: The BCL states that notice of a meeting of shareholders may be written or electronic, but it does not make clear whether the bylaws must authorize an electronic notice in place of a written notice. Until this issue is clarified, co-ops should amend their bylaws to authorize an electronic notice or give notice of the meeting to all shareholders by mail.
Proxies: The BCL permits the use of electronic proxies, provided it can be ascertained that the shareholder actually sent the proxy. It is recommended that the meeting-notice materials include a “directed proxy” – one that directs the proxyholder how to cast the shareholder’s votes. This way, the shareholders can complete and sign the proxy and return it by mail, or transmit it electronically to management or an election company if one is running the meeting.
Quorum: For those using a platform that allows for video, those attending are typically identified at the bottom of screen, and the secretary of the meeting or the inspector of election will have to carefully monitor those in attendance or call the roll to determine whether a quorum has been established. A record of those who attend the meeting should be created because the law requires that a record of all votes taken at the meeting be kept.
Nominations from the floor: In the absence of a nomination procedure in the bylaws, most legal commentators agree that nominations must be taken from the floor. There should be an announcement at the appropriate time that nominations are open along with an explanation of the method for making a nomination.
Voting: The new BCL amendment allows the board to create a procedure for electronic ballots. During the meeting, it would be possible for shareholders to vote by sending an email or text to the inspector of election.
The BCL governs corporations; condominiums are organized under the Real Property Law, which says the condominium declaration and bylaws set the procedure for calling and conducting unit-owner meetings, including the annual meeting. The BCL amendments adopted to address COVID-19 do not extend to condominiums.