Once unthinkable, virtual annual meetings in co-ops are beginning to look inevitable during the coronavirus pandemic – and possibly beyond. The law firm Armstrong Teasdale has put together guidelines on the mechanics of holding virtual meetings, noting that a new amendment to the (BCL) has removed the requirement in many corporate bylaws that annual meetings be held in a physical “location” or “place.” If the COVID-19 state disaster emergency is not resolved by Dec. 31, 2021, the amendment will expire.
(This advisory is specifically written for cooperatives. Those interested in virtual meetings in condominiums should review the Special Note About Condominiums at the end of this article.)
Selecting a Platform: Boards must provide shareholders not physically present a “reasonable opportunity” to participate in the proceedings and to vote or grant proxies by electronic means. Among the considerations in selecting the platform are the number of expected participants, the ability of the board to control audience questions and comments and regulate discourse, and the ability to display documents presented at the meeting. Boards should also consider the shareholder population’s access to computers or other electronic devices.
Nominations: If advance nominations are not mandated by the bylaws, we recommend that the board adopt an advance nomination procedure for the virtual meeting. Advance nominations also allow the circulation of proxies with the names of the candidates printed on them. Whatever the timing and procedure selected for nominations, it 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 does not make clear whether the bylaws must authorize electronic notice in place of written notice. Until this issue is clarified, best practice is to either amend the bylaws to authorize electronic notice, or give notice of the meeting to all shareholders by mail.
The notice should give the time and date of the meeting, state that the meeting will be conducted as an entirely virtual meeting, and explain the process for attending and voting, including hyperlinks, dial-in numbers and other information that will allow shareholders and proxy-holders to attend by computer, phone or other electronic means. It is recommended that any notice given electronically be accompanied by a proxy and a link to the electronic meeting site, so as to make connecting to the meeting easier.
Proxies: The BCL permits the use of electronic proxies, provided it can be ascertained that the shareholder actually sent the proxy. We recommend that the meeting notice materials include a “directed proxy,” that is, one that directs the proxy-holder 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.
Establishing a Quorum: If the majority of the shareholders utilize proxies, establishing a quorum should not be difficult. However, if there is no quorum through proxies prior to the meeting, there may be an issue establishing a quorum. For those using a platform such as Zoom 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 as 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 and an explanation of the method for making a nomination. This may include texting or emailing to a specified number or email address, or even recognizing a shareholder who is seen on the video screen to be raising her hand. Whatever the method, the instructions for making a nomination should be clearly stated and all shareholders and proxy-holders afforded the opportunity to nominate candidates.
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.
Q&A: If Zoom or a similar platform is used, people can raise their hands to be recognized and a moderator can unmute them. Boards can also set up a phone number or email address where shareholders could send their questions. The person receiving them would then read the questions or comments for all participants to hear.
Special Note About Condominiums: The BCL governs corporations; condominiums are organized under the Real Property Law, which says the condominium declaration and by-laws 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. However, we expect the courts will extend to condominiums the same rights to conduct entirely virtual meetings as are available to cooperatives. Of course, no assurance can be given that the courts will adopt this point of view, but we consider it reasonable to proceed as though the BCL amendments extend to condominiums.
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