If winter's here, can spring be far behind? This old adage is particularly meaningful in relation to the annual ritual which takes place among cooperative housing corporations each spring: The Annual Shareholders Meeting. Even though the ground may now be covered in snow, it is not too early for boards to start preparing for a successful annual meeting. Each year the shareholders must meet to elect a board of directors which will run the business of the building for the ensuing year. That election takes place at the co-op's annual meeting. The New York Business Corporation Law requires an annual meeting and the corporate by-laws specify a time for such a meeting.
While the election of a board is, of course, an important aspect of the meeting, it is also a time to report on the State of the Co-op, financial and otherwise; amend the corporate documents and proprietary lease, if needed; permit shareholders to pose questions to their board; meet new residents of the building; and last, but not least, provide a platform for shareholders to air their pleasure or vent their dissatisfaction with the manner in which their building has been operated for the past year.
Good Turnout Is Essential
A thoughtful board must start planning in advance if it wants the meeting to go smoothly. New York law requires at least 50 percent of the shares to be present (in person or by proxy) in order to create a quorum; and while election for board membership is by plurality, the corporate documents often require two-thirds of the outstanding shares to effectuate amendments. Accordingly, the first order of business is to create enough interest in the meeting so as to obtain a quorum. Next, the board must determine whether or not it is seeking to amend its corporate documents to incorporate such modifications as flip taxes (transfer fees); sublet fees; limitation of liability for the board members; shareholder late charges; or proprietary lease extensions. All of these changes generally require a larger turn-out to afford the two-thirds vote needed to effectuate change.
It is never too early to poll the existing board to determine who is seeking reelection or retirement. Serving on the board can be a thankless, time-consuming task, and it is not always easy to find shareholders who are willing to devote their time and energy to running the affairs of the co-op. It may very well take the board several months to secure the minimum requisite number of candidates. Advance prep time may also be needed to electioneer among the shareholders to obtain sufficient support to amend the corporate documents and institute new and needed programs.