The Business Corporation Law, or BCL, is one of the primary statutes regulating operation of cooperative housing corporations. The BCL was implemented over a century ago, and remained more or less unchanged until it was overhauled in 1998. The BCL provides a template for managing the board election process and protecting shareholders’ rights, and outlines legal methods of corporate governance. The following is a summary of some of the key points in the BCL impacting cooperative apartment corporations—things every board member and managing agent should be aware of, plus some points that should be of interest to shareholders themselves. (It should be noted, however, that these items apply to co-ops’ bylaws and Certificates of Incorporation, not their proprietary leases.)
In addition, a resolution by the board (without shareholder approval) to the extent authorized in the co-op’s bylaws or its Certificate of Incorporation may also amend bylaws. However, any such board-enacted bylaw is subject to repeal by vote of the shareholders. By switching from the super-majority requirement to the more flexible requirements in effect today, the BCL greatly enhances boards’ ability to effect necessary governing document revision. It also facilitates more shareholder initiatives to effect changes—even over opposition from their board.
Boards may wish to take advantage of this aspect of the law—which obviously facilitates the shareholder approval process—by enacting the appropriate amendment to their Certificate of Incorporation; such an amendment requires approval by both the board an the shareholders.
The statute requires that any such regulations be circulated to shareholders “In a manner reasonably calculated to provide [them] with sufficient time to respond prior to such meeting,” (i.e. to mobilize a proxy fight in accordance with the new rules.)