Q&A: Voting Question

Q Late last year, our board decided to make changes to our bylaws by an act of resolution; a move not authorized by our governing documents. A group of shareholders called a special meeting to oppose the changes, and they were voted on the following spring. Although a majority of shares voted, the changes were not approved by the 75 percent of shares necessary—and neither were they rejected by the 25 percent needed to deny the changes. Many shareholders didn’t vote in the mistaken belief that not voting was the equivalent of a “No” vote. Since then, the board has kept the voting open in an attempt to approach the non-voting shareholders. The question is: how long can this continue without a resolution? Can the board keep the voting open on this indefinitely?

—Manhattan Shareholder

A According to Eric Goidel, an attorney at Borah Goldstein Altschuler Schwartz & Nahins, “Section 608 of the Business Corporation Law of the State of New York provides that at a meeting of shareholders, regardless of whether a quorum has or has not been achieved, the shareholders present may adjourn a meeting. A meeting must be adjourned to a date certain. It cannot be an open-ended meeting solely for the purpose of solicitation of a favorable vote on a proposal. During the period of adjournment, solicitation of additional proxies, or the attendance of individuals, at the subsequent meeting can be pursued. While it is entirely possible to adjourn the meeting any number of times, too lengthy an adjournment, or too many adjournments, may create a problem as the identity of shareholders in the apartment corporation may significantly change. In the days and weeks ensuing after the date that the meeting was adjourned, apartments may be sold, and thus the composition of shareholders may significantly change.

“Section 604 of the Business Corporation Law requires that a Board of Directors fix a record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders or adjournments thereof. While certain corporate bylaws define the record date, the Business Corporation Law provides that in the absence of a specific bylaw provision, the Board of Directors may fix a date that is not more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors has not set a record date, the record date for the determination of shareholders entitled to vote at a meeting shall be at the close of business on the day next preceding the day on which notice is given. That section provides that the same record date will apply to an adjourned meeting, unless the Board of Directors fixes a new record date for the adjourned meeting. Accordingly, if the Board of Directors has not fixed a new record date, there may be any number of new shareholders who are not entitled to vote at the adjourned meeting and any number of shareholders who voted at the previous meeting, who have since sold, who are no longer impacted by the outcome of the vote.”

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