Every year, the shareholders of co-op apartments gather together—in their building's community room, or even in the basement in the shadow of the laundry machines, on flimsy chairs that are only used once a year—to discuss their mutual investment. The board is there, and the managing agent, and the accountant. Many of the neighbors materialize, but not that nice couple next door, because they rent. If the stars are in perfect alignment, the phantom sponsor—the guy who owns half the shares in the building but who you've never seen—will make an appearance (although usually he sends a proxy). The board president bangs on the table with her gavel—a stapler, actually—and calls for order…
This is the annual shareholder meeting, that magical event where you learn that maintenance is going up because of property tax hikes, that it's too expensive to refinance the building's mortgage, and that the affable gentleman you see in the elevator every morning, who always seemed perfectly normal, is actually a little bit nuts.
But what are the rules governing the annual meeting? What is discussed? How can board members and shareholders both prepare? Why do we have annual meetings, anyway … and what are the legal ramifications if we don't bother? Let's take a look.
The Fine Print
The state of New York is the governing authority that mandates the annual shareholder meeting for co-op buildings. Because cooperatives are, legally speaking, corporations, they are subject to the same state business corporation law that compels, say, Viacom to hold annual shareholder meetings.
The buck might stop with the state Attorney General, but it doesn't begin there. "It's also reflected in the bylaws of incorporation and the corporate charter," says Stephen O'Connell, a partner with the law firm of Hartman & Craven in Manhattan.