Know When To Hold, When To Fold

Know When To Hold, When To Fold

Governing a co-op is not for the faint of heart. One of the biggest challenges is  communication — that is, what documents and information boards should, or shouldn’t, reveal to shareholders. 

According to New York’s Business Corporation Law, a co-op’s financial statements must be issued by boards and divulged to shareholders on an annual basis. The offering plan to prospective purchasers is also a public document, and that can be distributed as well. Where it gets tricky is with board minutes. It’s not only become customary for prospective buyers and their attorneys to review minutes as part of their due diligence — it’s expected. The best practice for boards is to be as transparent as possible, and my advice is to divulge the minutes. However, you must redact things like shareholder issues, employment issues and contracts. You can’t divulge those because they’re private. 

Shareholders are entitled to review books and records of the corporation upon request as long as there is a valid reason or purpose. If there’s a request made in good faith and a board has absolutely nothing to hide, I don’t see a problem with granting it. If shareholders suspect board misconduct, they do have the right to file a court petition for production of certain books and records they want to see. 

The more disclosure and transparency, the better, as long as you’re not compromising the work the board is doing. Boards should have a methodology for informing people about the day-to-day and long-term operations of the building, in addition to what’s provided at annual meetings. Pick a method of communication, whether it’s email blasts or BuildingLink, and use it regularly.