Jonathan Leaf in Legal/Financial
Do a co-op’s shareholders have legal access to the corporation’s documents, such as financial statements, contracts, meeting minutes, and the names and addresses of fellow shareholders? If so, are there limits to that access and the ways the information can be used?
Those questions are at the heart of a legal battle now raging at the 618-unit Acropolis Gardens co-op in Astoria, Queens. Abbey Goldstein, a partner in the law firm Goldstein & Greenlaw – and the owner of several apartments in the co-op – requested access to corporate documents, including a complete list of the names and mailing addresses of all shareholders. The board refused. Goldstein sued.
Following a defeat in state Supreme Court in 2013, the Acropolis board appealed Goldstein's case to the Appellate level. But a year later the higher court upheld the lower court's ruling that Goldstein was entitled to a full list of the co-op's shareholders and their mailing addresses.
That decision raises the more general question of what rights shareholders have with respect to co-op documents. Attorney Kevin McConnell of Himmelstein, McConnell, Gribben, Donoghue & Joseph says he has "litigated and argued that a shareholder is entitled to all corporation documents, including copies of contracts with vendors and lists of shareholders – with their mailing addresses."
McConnell cites a 1976 appellate court ruling that established the principle that shareholders of a corporation are entitled to lists of the other shareholders, including their addresses. Courts have ruled that these records are entirely relevant and appropriate to request in a proxy fight.
McConnell observes that shareholders could also make a claim to the co-op's monthly financial records, in addition to the annual audited statements that are ordinarily delivered to them. Shareholders can also ask for the minutes to all shareholder, board and officer meetings. Shareholders have the right to copy those records.
But a recent New York Law Journal article by Eva Talel and Richard Siegler, of the firm Stroock & Stroock & Lavan, maintains that co-op shareholders do not have the right to other shareholders’ phone numbers and email addresses, although the pattern of recent court decisions suggests that the law might soon evolve in that direction.
Are there limits to what a shareholder can do with corporate documents?
Attorney Scott Greenspun, a principal at Braverman Greenspun argues that “if a shareholder has a document, he is not under an obligation of confidentiality." But Greenspun quickly adds that a shareholder who is requesting documents may have to sign an affidavit that he does not intend to use the documents "for a purpose other than a business of the corporation."
Indeed, McConnell notes, such an affidavit might expressly prevent the shareholder from selling lists or records which are provided to him. There might be an additional limitation: a shareholder must be part of the corporation for a specified period of time before gaining access to documents. Moreover, the shareholder must request the documents in writing with at least five days of advance notice, according to Talel and Siegler. These conditions are usually spelled out in the corporate by-laws.
Greenspun adds that he wouldn’t advise posting a list of the shareholders on the internet, but he does believe that shareholders are within their rights to share corporate documents with other shareholders.
Corporate documents, as it turns out, are not the private property of co-op boards.
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