It seems fundamental that co-ops should allow shareholders to examine anything involving the co-op. After all, your contract with your co-op is deemed "proprietary leases," confirming that you have proprietary interests in the co-op. And, of course, you hold shares of common stock in the co-op corporation. So you would seem to have status equivalent to that of the shareholders of a business corporation.
Yet co-op shareholders frequently hit a wall when you try to monitor "company" business and decision-making, and to have input into it by communicating with board members and fellow shareholders. This might seem odd, since potential purchasers of apartments – who are not yet shareholders or even yet board-approved – get to review board-meeting minutes. How could they have more rights in this regard than actual shareholders?
It's because the co-op world – like the business world – is not necessarily accommodating to minority stockholders, which is the status of virtually all co-op shareholders. Here's what happens:
Oral vs. Written Requests
The first approach for a shareholder seeking review of co-op minutes and other documents is usually an oral request to the property manager. Typically, the owner tries and fails once or twice before getting any sort of response. In the interim, the property manager presumably sought guidance from the co-op president, or other board liaison, who, if harboring any reservations, recommended consulting with the counsel. The more controversial the apartment owner making the request, or the more immersed the board currently is in controversial matters, the more likely the co-op counsel is consulted at an early stage.
The second approach for the apartment owner is submitting a demand in writing, which most well-counseled boards will require before directly responding to a request to review minutes or other documents. This has several purposes — all legitimate, if unhelpful.
First, it tests your degree of commitment. Second, it slows down the process. So, for example, you might want to review the minutes in order to mount a campaign to run for a board seat. But by the time your oral request is first made, ignored and made again, and then written request is made, sent to the lawyer and the board, and responded to, many weeks may pass and an election may have occurred and there may be a new board (so you may have to start the process again). Third and most significant, the writing requirement establishes what documents you're seeking.
This itself is significant for two main reasons: First, there are limited categories of documents that a co-op is required to allow a shareholder to review. The letter permits the co-op to determine whether it has the right to deny the request in whole or in part. Second, you must have a legitimate corporate purpose, as opposed to personal one, in seeking review of at least some of the documents for which review is permitted.
Board Meetings vs. Shareholders Meetings
With one major qualification, neither the law nor the co-op's governing documents require the co-op to allow a shareholder to review the minutes of board meetings. That exception comes if you're a party to a litigation involving your co-op. In that case, you may be entitled to review co-op documents, including the minutes, provided they are "material and necessary" to the litigation and not protected by attorney-client privilege or some other privilege. But board meeting minutes or deliberations are not privileged in their own right.
So let's get back to ordinary co-op existence: What happens when an apartment owner simply wants to review board meeting minutes and other documents to help monitor board decision-making for the good of all shareholders? How could it be that these documents are all essentially confidential unless there's a litigation to which some are material and necessary?
The law is not designed to encourage
participation by minority shareholders
in board decision-making.
Let's start with the fact that co-ops are corporations, which in New York are governed by the Business Corporation Law (BCL). This law was enacted and is maintained with a distinct bias in favor of shareholders who control corporations, and thus serve on boards and typically have no need to secure special permission to review meeting minutes or other corporate documents. Neither the BCL nor co-op governing documents are designed or intended to encourage regular or easy participation by minority shareholders in board decision-making.
BCL 624(a) requires corporations to keep meeting minutes. BCL 624(b) requires corporations to allow shareholders to review two categories of corporate documents: "minutes of the proceedings of its shareholders and record [i.e., list] of shareholders..." Notice the language: The law mandates review only of minutes of shareholders' meetings — generally speaking, the year's annual meeting for election of directors.
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