Voting by Proxy

Specific Rules Must Be Followed

By Bruce A. Cholst Esq.

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When it comes to decision-making in your building, attending meetings in person is always best. But should the need arise, shareholders and unit owners are permitted to vote in board elections and other matters of corporate governance by proxy or absentee ballot. Proxies are a valuable part of the voting process, but boards need to be aware of the legal implications that can arise when proxies aren't handled properly, as well as the potential for abuse that can result in a subversion of the electoral process. A better understanding of these issues as well as how and why proxies are used and the technical rules governing their issuance and solicitation will greatly benefit your building's election process.

Authorization to Vote

Proxies are written statements by a shareholder or unit owner authorizing another person (the proxy holder) to vote his shares or common interests at a shareholders or special meeting. In some instances, such as a lease amendment vote, proxies may actually substitute for a meeting. The general proxy gives the proxy holder complete discretion to vote any way he wishes. The specific proxy provides the holder with explicit instructions as to how the owner wishes to vote. A hybrid format can also be used in which the proxy is general in nature, but space is provided for specific directions to the proxy holder.

Boards often rely upon the collection of proxies to fulfill the quorum requirement at the annual shareholders meeting or any special meetings, but may not use them at board meetings. Under statutory law and virtually every set of association by-laws, no official business (including board elections) may be conducted without the presence of a quorum, which usually consists of a majority of outstanding shares or common interests, in person or represented by proxy. It's a good idea to remind shareholders or unit owners in writing before the meeting to send in their proxies, if they will be unable to attend, so they can be counted toward the quorum. Include a stamped, self-addressed envelope for return of the proxy and follow up with a door-to-door or telephone lobbying effort. Shareholders and unit owners should be urged to submit a proxy even if they intend to be at the meeting. This way, if a last minute conflict makes it impossible for them to attend, their vote can still be counted.

Sometimes shareholders and unit owners refuse to furnish a proxy because they don't want to take a stand on a contested vote. This is especially true of sponsors or banks (that have acquired their units through foreclosure) that don't wish to take sides in a squabble between residents. Such a loss of votes can account for the failure to achieve a quorum; however this obstacle can be circumvented by providing a space on the proxy in which the proxy holder is instructed to record a vote for quorum purposes only, meaning that the vote is registered as part of the quorum but not counted for one side or another.

Sometimes board members undertaking a proxy solicitation are concerned that designating one or more of themselves as proxy holders creates an appearance of impropriety. In order to preserve the integrity of the electoral process, these boards may appoint independent employees or principals of the managing agent as proxy holders. Boards following this route should make absolutely certain that only a specific proxy form, giving the proxy holder no discretionary authority whatsoever, is used; otherwise the managing agent may be inadvertently handed the power to elect the board.

Rules Concerning Issuance

Many boards and dissident groups organize proxy solicitations to elect a particular faction of candidates. They not only mobilize the vote, but also marshall it in favor of the candidates whose election they are seeking. An organized lobbying effort is of paramount importance in this context; but, the rules concerning issuance, drafting and solicitation of proxies are also relevant, because any infraction could result in disqualification which defeats the purpose of their collection.

The cardinal rules regarding issuance of a proxy are that the document must be in writing, and it must be dated and signed by the record owner or his attorney in fact. Unless indicated otherwise, the term of a proxy is 11 months from its issuance. If multiple proxies are issued by the same shareholder, the only valid one is that which was issued latest in time.

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Proxies signed by any person other than the owner of record are invalid unless accompanied by documentary evidence such as a duly executed Power of Attorney, Letters Testamentary or Letters of Administration that this person is signing as attorney in fact. If the record owner dies or is found incompetent after issuing of a proxy, the proxy is valid unless the association's secretary has been notified in writing prior to the meeting.

If the subject shares or common interests are jointly owned and a proxy is issued by only one of the owners, he is presumed to be acting on behalf of the other owners, and the proxy is considered valid and binding, unless a written notice from the dissenting joint owners is made to the association's secretary before the meeting. If the owners are evenly split, the votes are pro-rated. In the event of a disagreement between joint owners, and a majority favors one position (i.e., three joint owners split two to one), the majority preference rules as to how the vote should be counted.

Revoking Proxies

A shareholder or unit owner who changes his mind can issue a new proxy reflecting his revised preference. A proxy can also be revoked by written notice to the association's secretary. Or, a shareholder or unit owner can revoke the proxy by attending the meeting and casting a ballot that reflects the new preference. The ballot will supersede the previously issued proxy; however, merely attending the meeting, without actually casting a ballot, will not serve to revoke the proxy.

In most cases proxy forms designate more than one proxy holder. If the form is drafted to designate A or B as proxy holder, then either one may act independently of the other, and the actual bearer of the proxy is the one who gets to cast the votes. If, on the other hand, the proxy form is drafted to designate both A and B as proxy holders, they must act jointly in order for the proxy to be valid. This distinction is crucial when the proxy holders each represent different factions of candidates or different sides of an issue being voted upon. Proxies may not be purchased in exchange for money or anything else of value such as a promise of favorable treatment after the election. To the writer's knowledge, there are no court decisions with respect to the validity of fax proxies. But while the use of fax proxies would probably be upheld in the event of legal challenge, it is safer to enact a by-law amendment sanctioning their use.

Pitfalls to Avoid

An awareness of common pitfalls can help preserve the integrity of your association's future proxy solicitations. The overwhelming majority of proxy forms circulated by boards are general in nature, giving the designated proxy holder unfettered discretion in casting the votes represented by the proxy. Shareholders and unit owners should be told how the proxy holders intend to vote, so that the issuance of proxies becomes a process of informed consent. They should insist upon this kind of disclosure before issuing their proxies. Or they should change the proxy form to a specific proxy (initialling all changes to authenticate them) or compose their own proxy form. Individuals soliciting proxies might consider using the hybrid general/specific proxy form referred to above.

The issue of whether multiple proxy holders have joint or separate authority to cast the votes represented by a proxy can be critical. Joint authority should not be considered unless all of the proxy holders are firmly allied with each other on the slate of candidates to be elected or the issue being voted upon. If the shareholder or unit owner whose proxy is being sought is not comfortable with one or more of the designated proxy holders, he may make the appropriate deletions (initializing the changes) or simply substitute his own designated proxy holder. It's important to be aware that pre-dated proxy forms reflecting the day of the meeting or the day before the meeting are sometimes circulated. These proxies are illegal because they curtail the right to revoke a proxy before the meeting.

Whenever there is a contested election or issue, inspectors of election should be selected at the meeting. If the association's by-laws permit the appointment of inspectors, and at least one shareholder or unit owner demands such an appointment, compliance with the request is mandatory. Inspectors have the authority for resolving challenges to proxies in only two areas: Do the books of the association indicate that the person issuing the proxy is the record owner of the subject stock or common interests? Is the proxy, on its face, legally valid? Inspectors don't have the power to determine whether the shareholder or unit owner was legally competent when the proxy was issued, or whether the proxy is a forgery or was obtained under duress.

Inspectors are required under the Business Corporation Law to issue a written report of any challenge, question, or matter determined by them and execute a certificate of any fact found by them upon request of any shareholder or unit owner. Such findings, as well as any others that are outside their scope such as fraud, duress, forgery or incompetence to issue the proxy are subject to judicial review in a supreme court proceeding. However, the commencement of such a proceeding is subject to a strict 120 day statute of limitations.

Proxies are a useful tool, but even when handled correctly they are an imperfect substitute for attendance at association meetings. It is only at these forums that a full exchange of views between voters can occur.

Bruce Cholst is a partner at Rosen & Livingston, a Manhattan law firm specializing in the representation of co-op and condo boards.

Comments

VICTOR J. PAPA

Can you provide a copy of the hybrid general/specific proxy form referred to above. I represent a faction opposed to the financing of an offering plan to the shareholders of Southbridge Towers in Lower Manhattan.

Lane Stafford

Will you provide a comment concerning a proxy holder "changing" the specific vote selected on a proxy? Thank you.

Bob Knox

I am trying to find out if proxies are opened before the meeting of members or at the meeting, to be able to deterimine if we have a quorum or not.

N. R.

I have been appointed the proxy for a fellow member of an association. Not having voted a proxy before, how will I make the proxy vote known at the meeting. The original proxy form appointing me was mailed to the corporation president. Thank you.

Anthony LoGrande

What happens when a proxy designee or agent does not attend the shareholder meeting?Are his proxies invalid because he did not attend the meeting?

TS

If you are voting proxy at an association meeting and lost your proxy can you get a copy?

Walton Parker

What happens when a proxy designee or agent does not attend the shareholders meeting? Are his/her proxies invalid because he/she did not the meeting?

Mark Levine

@Walton: Yes, the person designated on the Proxy must be in attendance, otherwise they do not count towards a quorum / voting. The person on the proxy needs to sign in.

an unknown user

can an email, a notarizes letter or a PDF be used as a proxy?

br

can proxy's be opened PRIOR to the meeting and vote?

Linda

Can you provide some general language for non-profit by-laws to authorize proxy votes?

Natalie

Do proxies have to be counted

Bev

If a by-law is not passed because of a lack of quorum proxy votes, can the board of directors not end or close an AGM until they solicit enough votes to get the by-law passed. The AGM was over 2 weeks ago as they wait to collect more proxies. thanks for your time and consideration

Stan Green

Can a proxy holder use the proxy to remove the shareholder that gave him the proxy? High stakes meeting. Proxyholder uses his large block of stock to remove the owner against his wishes.

kathy

does a proxy have to be an owner or board member or can it be anyone you choose?

Katherine

Can a Board limit, or does the BCL limit the number of proxies that one shareholder can hold? We have a problem with one shareholder who has amassed proxies from a majority of absent shareholders in our building.

an unknown user

Proxy form does not provide for a date. Does this make them invalid?

Cary

Can the same proxy be used to cast a vote in a 'subsequent' meeting on the same topic if no quorum was reached in the first meeting?

jerry moore

can a board member give a proxy vote to some one that is not a board member to take his place at the meeting of board meeting,. trinity texas thank you

R.J.Brown

Can a proxy only vote or are they allowed to take part in any discussion or offer opinions?? please advise.

John Richards

May a Board, as an entity itself, be designated as the proxy holder? This would imply that the board would have to vote in order to determine how the proxies are used if we are talking about general proxies...

Janet Underhill

Can a unit owner revoke proxies from prior years elections?

an unknown user

can a proxy holder use each proxy to vote for the same person for three separate seats? For example, if someone had 50 proxies and there were three open seats, could that person vote 150 for the same candidate?

Julie Jones

There are members on our EC who are soliciting for votes at our next AGM. I have been informed they are door knocking and telling people I was sacked from the committee due to incompetence, this is not true, I resigned due to family commitments and wish to be reelected this coming year. Can someone please giud me on the legalities of the defermation of my credability. Look forward to hearing back soon. Yours sincerley Julie Jones

h eauter

is it legal for signed proxies to be taken of pre mises. is it allowed that an officer other then the secretary,who is the person voting the proxies to open and take the proxies to manother location the the adress the proxie was send to. When should proxies be opened at the day of the meeting or before. is it legal for a board member to call a member to to change his vote after a proxy has been received.

Sue Maricle

Can the person running for position, make his own proxy ballet and cast votes for other people?

Vickie Stevens

I need an answer to the same question put forth by R.J.Brown. Can a proxy only vote or are they allowed to take part in any discussion or offer opinions?? please advise. Our Latest HOA Annual meeting was CRASHED by an Attorney hired to vote a proxy at out meeting. No only did he grandstand throughout the meeting, most of the information he provided to the sheep in our mists was a complete lie.

Danielle

My building had its' shareholders meeting yesterday. One of the board members presented proxies that had been obtained weeks earlier, but which he dated as though they had just been received that day. Some of the shareholders had submitted proxies after they signed the ones given to him as they found out he had lied to them about being a building resident. These shareholders specifically submitted new proxies to board candidates who are resident shareholders. But because the non resident board member dated them the date of the meeting, his prevailed. One of the proxies was gotten because he blatently lied and said it would NOT be used for the meeting, it was "needed for something else". The votes were tallied and he (barely) got on, The shareholders are very upset and want to have the illegally dated proxies pulled. Is this possible? Or could a new vote be held?

Lenor McNaughton

If a condo is owned by 2 people and they both attend the general meeting and disagree on the vote that is before the association does this give the one vote half recognition or in other words does each half vote negate the other. One voting for an increase in dues and the other voting against an increase in dues?

ELLE

Is it lawful for an HOA to charge me $5 for not returning a proxy vote?

Karen

Is the Board Allowed to open the proxies before the meeting?

Ellen

Is a proxy vail if it has not been sighned or dated. Our mmanagement company sent out a proxy with no place for a signature or date and is saying that since it was returned in a sealed envelope with the resident's name (not necessarily a signature) on it, that it is valid. I don't beleive this is the case, but cannot find anything in New Mexico law to dispute the claim.

Robert

We have a person that runs for a board position that year after year gathers a majority of the votes by soliciting Owners votes that are unaware of his doings just prior to our annual meeting. Those in attendance all vote against him but he gathers enough proxies to win the vote year after year. Is there a way the board can rule out proxies or the amount a single person can have for voting reasons?

Paul

May the secretary use the Proxies mailed to him to vote for himself and others.

D.W.

If I am running for Board of Directors position (HOA) can I also be a proxy holder for other homeowners? If so, am I limited to how many?

JAN

My assoc. president has been doing this for nine years now so she and her friends stay in power. It is unethical. The slate of candidates should be on the proxy with the owners able to cast their vote. Question....can a later date be added to the proxy after it is signed....tks a lot

Mary

I voted to form a HOA with my neighors for specific reason only to have have some owners meet and plan to undermine our CCR's but witheld this from the other owners. We voted to form a HOA and the mintues did not refect what was really talked about at the vote. That one owner voted contingent and that the new bylaws would not be used as discribed to us as owners but to take contol of the street by those in violation of the CCR's. So we voted yes but without full disclosure.. Can I revoke my vote or can I challenge the vote?

Robert Egan

Can a unit owner prepare a valid proxy in advance of the special meeting which complies with the documents. For years the BOD sends out a proxy appointing the clerk and the clerk votes the proxies for the existing BOD. The election is decided before it starts. I would like to develop and solicit a valid proxies in advance of the meeting. Your thoughts

Jean Marki

Re: Katherine's question.....limiting the number of proxies a member can hold? Yes or No

leon

can a shareholder chance a proxi without the directors authorization

Marty

If I own 30 shares can I give a proxy to 5 different people? For example give each of those 5 authority to vote for 6 shares?

Property Manager

@Marty, usually you can only sign one (1) person to sign on your behalf as your proxy. You would not be able to split them off into increments of a few shares each. Read your bylaws and see as well for the exact language.

CONCERNED

I CANNOT ATTEND THE ANNUAL HOA MEETING FOR HEALTH REASONS BUT IAM UNSURE IF I WANT TO SIGN A PROXI I DONT KNOW ANYONE IN MY NEIGHBORHOOD IAM NEW IN THE COMMUNITY I HAVE TO OPTIONS IN MY PROXY 1 THE PRESIDENT OF THE COMMUNITYHOA,INC OR IN HI/HER ABSENCE HE SECRETARU OF THE ASSOCIATION OR SOME ONE I WANT TO APPOINT. I DONT WANT MY PROXI TO NE MISSUSED I DONT KNOW WHAT TO DO SHOULD O SEND IT OR SHOULD I JUST NOT SEND IT IN AND DONT ATTEND THE MEETING.

joann

do proxie votes count iat a meeting if all shareholders were not sent a proxy even though a quarm was present ??

murray

I have a problem over proxy votes. 1: do poxy votes need to be in a sealed envelope and opened only during the meeting before all those present or can they be opened and read before the meeting starts. (1week before) 2: Are proxy votes recorded as to who hold who's proxy vote. 3. Do these proxy votes need to be recorded in the minutes of the meeting and who the person is that is using them to vote.

Mary

The record holder died. Before the person died she wrote a letter to the Receiver that she wanted her shares transferred to her name and her fathers. The Receiver did not put the fathers named on the Stock holder List. By the time the election took place, the father signed his name on the proxy "for the person" and stated because was deceased. Since the signature was not the name of the record holder, the proxy was invalidated and those votes were not counted. If the person is unavailable to vote because of death and the person initiated a stock change before death, why would not the proxy signature be valid?

an unknown user

Does the date on a proxy have to be in the handwriting of the shareholder? If someone mails me a signed, but undated proxy, may I fill in the date of the postmark?

Clelia

When voting a majority is reached by the nunbers of owners or by the nunbers of lots. out of 10 owners 5 own 1 lot each and 3 (wjch have voted against )2 of them own 2 lots each. By lots we have a parity of 5 versus 5. By owners we have 5 versus 3

John G. Kost

Your reader Anthony LoGrande asked what is the effect on Quorum if the proxy holder is not present at the meeting. Please provide me your answer. Our HOA Secretary was named proxy on written form for many owners, but was not present at the meeting. Secretary now asserts the Manager who works for Secretary was present which should be sufficient. I disagree. Thanks for your reply.

JM

May a board member collect proxies (over 100 proxies) to vote in the annual general election, and vote for all owners he has proxies for if he is also a candidate for election?

Joan

Do I as owner have to sign proxy that I am having my friend vote for me at annual meeting for regarding Condo Assoc for new board members.

Debbie Denley

We have an AGM coming up and i have a concern about proxies. How many proxies can one person use along with their own vote. Please reply asap Thnak You

gary

if there is an election of the HOA board and the 'board' is designated as the proxy how does the board decide who those votes will go to? There are currently 8 on the board and all 8 are running for realection as well as 3 new candidates. Does each current board member get 1 ballot and then those 8 ballots are totaled to see who gets the entire boards vote. There are approx 35 proxies filed to date.

mags424

Can a vendor, who is also an owner, hold proxies for other owners? Is that legal?

Holmes Simons

Our Bylaws prevent anyone from holding more than 5 Proxies. President attends meeting with more than 20 Proxies (w/ Power of SUbstitution), and when informed of the five Proxy limitation, to avoid invalidation of the proxies he substitutes several other members of 15+ Proxies. Question: Can a Proxy Holder use the Power of Substition if he is physically in attendance at the meeting? Thanks.

260whiteplains

3 questions please: 1. How long can a board go without have an annual shareholders meeting. 2. Proxies form that need the shareholders to vote? 3. How can shareholders get a new president? The co-op I am in has had the same person for over 20 years.

sidney goldfischer

Is there such a thing as a directed proxy written by a shareholder that lists the name of the voter's choices?

Mary Schuler

Why would a management company of a Home Owners Assoc. need to make a copy of all Proxies recieved.? Is the intent to reuse some one's signature to a follow on issue.

Doc

Is it legal / ethical for the secretary and president to collect and submit over half the proxies needed for a quorum to elect the BOD when the proxies are general and the home owners do not know in advance who is running until the day and time of the meeting whereby the proxy holder elects the board members as the proxy holder?

D Palmer

Can a time share owner who gives his proxy to the president of the time share association make a motion at the annual homeowners meeting or second a motion made by a time share owner

an unknown user

if only one board member is present at an election meeting, should that board member be able to take charge of any unnamed proxies due to the President and Vice President not being in attendance and for that member to use those proxies to count towards a quorum.

basher1

Do unnamed proxies go to the President to use at his discretion and if the President is not attending the meeting, do those proxies get passed to another board member who is present at the meeting.

an unknown user

Our HOA had two open positions. Since there was only two applicants running, they decided they didn't have to have ballots sent out and the two applicants were automatically on the board. The governing documents are old and just disclose the prcess which is to obtain votes. Is this legal?

lewis Fowler

can you ask to verify the proxy's that are held by the board as being legal our board members say they hold 13 proxy votes but will not let anyone see them

Jackie

@R.J. Brown - Can a non-shareholder use a proxy for a non-voting meeting or can it be only be use for voting purposes?

I.M.

Is an email consent to vote in a certain way be considered a legal proxy without signature or an actually proxy attached to the email?


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