The Cloudy Future of All-Virtual Annual Meetings

Over the past 15 months, co-op and condo boards and residents have overcome their initial trepidation and learned to embrace virtual annual meetings. Our experience is that virtual annual meetings have increased owner attendance and reduced the time (and attendant expense) to conduct the meeting. And the feedback from shareholders and unit-owners has been enthusiastic. However, boards need to be aware that the expiration of COVID-related emergency orders will result in limitations on the continuation of virtual annual meetings – unless Gov. Andrew M. Cuomo signs a bill that recently passed the state Legislature.
Even before the pandemic, co-op boards had the authority under Section 602 of the Business Corporation Law (BCL) to permit shareholders to attend annual or special meetings virtually or telephonically. However, this section did not allow for a 100% virtual shareholders meeting; rather, the statute permitted boards to have a “hybrid meeting,” where shareholders could decide whether to attend virtually, by telephone or in person.
As a result of the pandemic and social distancing requirements, Cuomo enacted Executive Order 202.8, which suspended the BCL’s requirement that shareholder meetings be noticed and held at a physical location. This allowed boards to conduct shareholder meetings with exclusively virtual and telephonic attendance. Although this order has been rescinded, the governor signed legislation that amended Section 602 of the BCL to provide that “for the duration of the state of disaster emergency declared by [Executive Order 202] … or until Dec. 31, 2021, whichever is later,” a board of directors “may, in its sole discretion, determine that the meeting [of shareholders] be held solely by means of electronic communication.”
Since the state of disaster emergency was rescinded effective June 25, 2021, cooperatives can hold 100% virtual shareholder meetings until Dec. 31, 2021. The bill now on Cuomo’s desk would amend the BCL and allow boards to continue to conduct all-virtual meetings after Jan. 1, 2022. Boards would still have the option of holding an in person-only shareholder meeting or having a hybrid meeting that shareholders can attend either in-person or virtually.
Although there is no analog to Section 602 in the Condominium Act, and since no executive orders have addressed annual meetings of condominium unit-owners, many condominiums have nevertheless conducted virtual annual meetings during the pandemic. Authority to conduct virtual unit-owner meetings can be gleaned from the fact that executive orders made holding large in-person gatherings illegal, and the courts, in other contexts, have applied the BCL in instances where the Condominium Act was silent. However, since the executive orders limiting indoor gatherings have been repealed, the authority of condo boards to continue holding virtual owners’ meetings is questionable, and condo boards that want to allow unit-owners to continue to participate in meetings virtually or telephonically should amend their bylaws to ensure the legality of such meetings. It is not uncommon for condominium bylaws to allow for amendment by written consent, so it is possible for a board to seek unit-owner approval for a virtual format in advance of sending out notice of the next annual meeting.
As things stand now, cooperatives cannot amend their bylaws to provide for 100% virtual annual meetings, since Section 602 of the BCL mandates that shareholder meetings take place at a physical location after December 31, 2021. If Cuomo signs the bill, as expected, all that will change.
Scott S. Greenspun is a principal and Maria Boboris is an associate at the law firm Braverman Greenspun.