Co-Op Board Faces Lawsuit After Failing to Hold Annual Meetings During Pandemic

At a co-op on the Upper East Side, shareholders staged an uprising and threatened the board with a lawsuit because during the pandemic annual meetings were not held for two years. The co-op had staggered terms for board members, and because voting had not taken place, shareholders questioned the legitimacy of the board. A creative solution was needed to get governance back on track.

Disruption and Legal Threats

With the majority of shareholders away for extended periods during the pandemic, the annual meeting was skipped in both 2020 and 2021. “This prompted a group of shareholders to threaten to sue the board for breach of duty,” says Cosmin Ardeljan, senior vice president of All Area Realty Services, who manages the property. The board had staggered terms, which meant that by the time an annual meeting was held there were only a few remaining board members whose positions were legitimate. 

Re-Staggering Board Terms

Responding to the shareholder’s challenge, the board immediately held an annual meeting and elections. In order to reinstate the staggered terms, Ardeljan says, “the people who received the most number of votes got a three-year term, the person who got the middle-most votes received a two-year term, and the person with the least amount of votes received a one-year term.” This restarted the ‘stagger’ clock, and the threat of the lawsuit was withdrawn.

Combination Solution

With the resumption of annual meetings, hybrid and online meetings are now the new normal. “What we're seeing across our portfolio at this point is a request for hybrid meetings,” Ardeljan says. In some cases, this is because owners and shareholders have not fully returned to their primary residence in the city. However, there’s also much more flexibility for people to attend an online or hybrid meeting. “Very often, the board arranges something to accommodate a presence online, whether it's some simple AV setup or a dial-in number where people can participate remotely,” he says. 

—Emily Myers