Kathryn Farrell and Bill Morris in Board Operations on November 21, 2019
Governing co-ops just got a little easier. Gov. Andrew Cuomo has signed a law that amends the Business Corporation Law (BCL), allowing shareholders to attend annual meetings – and vote – from remote locations via electronic hookups. The change is designed to make it easier for corporate shareholders – including shareholders in housing cooperatives – to attend annual meetings and cast votes when they can’t be physically present. A likely result is that it will be easier for co-ops to achieve a quorum, which, for many, is a perennial challenge.
Before the change, shareholders had to agree to amend their bylaws to allow shareholders to attend meetings from remote locations via such services as GoToMeeting, Zoom, and teleconferencing.
“This new law says that a corporation may implement ‘reasonable’ measures to provide shareholders not physically present at the meeting with a ‘reasonable’ opportunity to participate,” says attorney Marc Schneider, managing partner at Schneider Buchel. The amendment also allows these far-flung shareholders to vote electronically. Since the amendment was made only to the BCL and not the Real Property Law, it does not apply to condominiums. However, condo unit-owners can implement such a change by voting to amend their governing documents.
Teleconferences and streaming meetings are not brand-new. Mark Levine, principal at the management company EBMG, has used technology to make special meetings more accessible. “I have, on occasion, had open meetings dealing with a special topic like construction, or an update from management or the architect,” he says. “Because it’s not a meeting that’s going to have voting, we don’t have to check the quorum.”
An important facet of the new law is its requirement for verification. Corporations must implement “reasonable measures to verify that each person deemed present and permitted to vote at the meetings by means of electronic communication is a shareholder of record.”
Says Schneider, “The reason why that's in the law is because we don't want to essentially have somebody to be able to vote for you when they're not you or they weren't given a proxy. You’ve got to deal with the platform you use. There are authentication procedures – maybe an access code, maybe you can see the person’s face.”
While electronic attendance from remote locations is sure to make co-op governance easier, technology comes with risks. “While this form of communication can better connect boards and their shareholders,” Schneider says, “the old-fashioned meeting practice of all shareholders being present at a shareholder meeting appears to be a safer method because you have the person in front of you. When you use electronic media, you may think you’ve authenticated the person, but there may be ways for someone to get around it. The only way to be 100 percent certain is to be face to face.”
As a result of such concerns, Schneider speculates that some co-ops will be leery of electronic attendance. “I don’t think all co-ops are going to want to stream their annual meetings,” he says. “When you have a sensitive subject you want to discuss at the annual meeting, a co-op might want to confine that discussion to the room where the meeting is being held.”
Will most co-ops take advantage of this leap into the 21st century? “I think it's going to take some time,” says EBMG’s Levine. “I think part of the interest of the annual meeting is that it's also a community in its neighborhood. That's when everybody likes to get together and see who's there, see who's new to the building, kind of check in once a year.”
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