Q&A: Do We Need an Actual Quorum?

Q. We are a cooperative that falls under the purview of the New York State Business Corporation Law. Is there a law in there allowing us to conduct a meeting without a quorum having been reached? We need more than 50% of the vote and certain shareholders refuse to attend the meetings. We don’t have a co-op board and cannot elect one. The old board members, still in place, have all moved out of state, and we cannot hold elections. We are quite literally stuck between a rock and a hard place. The housing court ruled that are supposed to get a new board in place by the beginning of the new year, but it doesn’t look like that is going to happen. What can we do? 

                  —Foundering in Flushing

A. “Unfortunately, according to the New York State Business Corporation Law (BCL) and your bylaws, a quorum is necessary at a meeting of shareholders in order to elect a board of directors, explains Geoffrey R. Mazel, an attorney and partner with the Manhattan based law firm of Hankin & Mazel, PLLC.

“There are no exceptions to this law.  A quorum is usually defined in your bylaws and is most commonly fifty per cent of the outstanding shares present at a meeting.  A quorum may be reduced to a lower number, but this requires a shareholder vote to amend the bylaws.  It sounds like a serious situation in light of the fact that your shareholder cannot get a board elected, and the board is not functioning.  

“Based on your question, it sounds like litigation has been commenced in an attempt to cure this situation.  The New York State Supreme Court is empowered to call shareholder meetings when the court is petitioned by aggrieved shareholders. If such a meeting is court-ordered it is incumbent upon aggrieved shareholders to collect sufficient proxies to reach a quorum.  If this does not work, you may consider resorting to the drastic remedy of petitioning the court for the appointment of a court appointed receiver to manage your property, until such time, and the cooperative can get a board elected to function properly.  This is a drastic measure and could prove costly to the shareholders.

“While there is no easy answer, but most prudent course is to motivate the shareholders to attend the shareholder meeting in person or by proxy. Otherwise, it could prove costly in more ways than one to the entire cooperative.”

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