— Confused Shareholder
“Once the control period has passed, you must turn to the governing documents to determine what rights the sponsor has with respect to voting for directors in an election for the co-op’s board of directors. In that regard, there are typically two types of provisions which govern the sponsor’s rights; to wit: (1) a voting control clause; and (2) a “will not elect” clause.
“A voting control clause is one which permits the sponsor to vote his/her/their shares for the election of directors in any manner they choose (for all candidates) provided the sponsor did not nominate the candidates and the candidates are not related parties to the sponsor. In that regard, voting control clauses are very similar to the New York State department of law regulation discussed above. An example of such a clause is as follows: ‘sponsor may vote for all candidates up for election, but no more than three members shall serve by reason of the votes cast by sponsor.’”
“‘Will not elect’ clauses, on the other hand, actually prohibit a sponsor from voting his/her/their shares for one more than a majority of the seats up for election (i.e.—if there are five board seats up for election, the sponsor can only cast his/her/their votes for two seats.) An example of such a clause is that the sponsor agrees not to elect a majority of the board.”