Creating a formal ROFR for cooperative corporations requires amendment of the basic corporate documents. We recommend amending both the proprietary lease and bylaws as well as the certificate of incorporation. The bylaw amendment should contain a provision requiring the terms of the ROFR be added as a legend to all stock certificates issued by the cooperative corporation.
If you already have an ROFR, examine it carefully. Flaws, ambiguities and problems often become evident: (1) the 20- to 30-day period for exercise is too short; (2) unit-owner/shareholder approval is required; (3) the unit-owner power of attorney is too restricted; (4) bank foreclosures are exempt; (5) the notice provisions are unclear; and (6) the closing must occur too quickly after exercise. Eventually, it will reach a conclusion that the rules need to be changed. How is that done? For a condominium, a super-majority unit-owner vote is usually required, followed by a filing of the amendment with the county clerk or registrar. Filing is mandatory and often overlooked. Failure to file is fatal.
For a cooperative corporation, amendment procedures depend on where the ROFR is located. If it is in the certificate of incorporation, a shareholder vote will be required. On the other hand, bylaws may be amended by either the board or by shareholders (unless restricted by the business corporation law or the terms of the bylaws). Often the bylaws cannot be amended without sponsor consent as long as the sponsor owns a stated percentage of the cooperative.
The unit-owner vote required to amend the condominium bylaws sometimes requires both a high percentage of "common interest" and a high percentage of unit-owners.
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