The Meter is Running
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Will all-virtual meetings still be allowed next year?
AUTHORLeonard Khandros, Tane Waterman & Wurtzel
The forecast for virtual annual meetings is cloudy. As most people know by now, in 2019 the New York State Legislature amended Section 602 of the Business Corporation Law, which governs annual meetings for co-ops. For the first time, it allowed co-ops to have hybrid meetings. You still have to have a physical place for the meeting, but you’re now able to allow shareholders to participate virtually. When the pandemic hit, Gov. Andrew M. Cuomo signed an executive order staying the physical-place requirement. That opened the door for buildings to have solely virtual annual meetings.
For the first time, a lot of buildings were achieving a quorum. It became very efficient, and they wanted to continue this. I think there’s a misconception out there that once Gov. Cuomo repealed that executive order, virtual annual meetings were no longer permitted. However, the legislature back in 2020 amended BCL 602 to allow virtual annual meetings to be held until the end of 2021. We don’t really know what’s going to happen after the end of this year. What we do know is that there was a bill on Gov. Cuomo’s desk before he left office — it would allow all-virtual meetings. We’ll see if Gov. Kathy Hochul signs it.
For condos, the forecast is even cloudier. The other piece of this puzzle is condos. Some have argued that if the Real Property Law, which governs condos, is silent, then the BCL will fill in the blanks. However, there has been some recent case law that casts doubt upon that. And as we sit here today, condos do not have the legal authority or statutory authority to hold solely virtual annual meetings. They have to have a physical place under a provision in most condominiums’ bylaws. I advise my condo clients that a virtual annual meeting is subject to challenge. But pretty much every condominium that I represent, and that’s about at least 75 buildings, has either had a virtual annual meeting or has tried some sort of hybrid option.
Preparation is key for a successful virtual meeting. The meetings have been very popular. The downside is, every year the residents like to be in the same room. They like to see each other. It becomes almost like a social event. In our experience, however, if the board and management and counsel spent a little bit of time preparing ahead of time, these meetings almost uniformly ran smoothly.
You have to leave plenty of time for preparation. I would start preparing no less than 30 days beforehand. And preparation means talking to the board and the managing agent about who’s going to run the annual meeting. What platform are we using? If you’re going to use a directed proxy, which we recommend, explain how a directed proxy works. Explain if there’s going to be a default proxy holder and what that means. Somebody should be checking to make sure that the person who registered is actually a shareholder, and only then should they release the link to that person. These measures are going to cut down on any challenges to the election.