Balancing Transparency and Confidentiality in Corporate Document Requests

When residents come knocking …

UNDERSTAND WHAT CORPORATE DOCUMENTS THEY CAN SEE

When a shareholder or unit- owner requests to see corporate documents, many anticipate trouble on the horizon. Consider a landscaper seeking proprietary details from a competitor’s contract, or a resident gathering contact information to protest board decisions. The key to handling these requests is to embrace transparency while at the same time protecting sensitive information.

THE RIGHT TO KNOW. The right to review documents is found in an association’s governing documents, corporation law or the state’s condominium act. All of these pretty much state that owners are entitled to copies of the financial documents, balance sheets, profit and loss statements, a shareholder or membership roster and minutes. However, there are limits to what residents can access. In a recent court case, for instance, a resident  requested email addresses and phone numbers for all community members to voice concerns about a board decision, but the court said they were entitled only to names and physical addresses. Boards can also restrict access to confidential information in vendor contracts, personal information about other residents, individual arrears reports, architectural requests from other homeowners and attorney-client privileged documents.

MANAGING DOCUMENT REQUESTS. It’s a good practice to have a procedure in place before requests arrive, and that includes immediately reviewing and responding to the request.  Once the request is received, your procedure should include verifying the requester’s standing, assessing whether the purpose is proper, requiring an affidavit stating the purpose of the request, reviewing and redacting sensitive information when replying, and having the requesters sign a confidentiality agreement. A confidentiality agreement would be prepared by your association’s attorney, and it would provide that the person requesting this information will not communicate the document’s contents to third parties. It should also stipulate what will happen if the agreement is violated. Basically, it serves as a deterrent to unlawfully disseminating the information provided. While you must provide access to documents, you can also control how it happens. You can require inspection at a physical location during business hours and set time limits, or you can just provide a flash drive or email copies. You can even insist on in-person review at the management office.

PREVENTING REQUEST OVERLOAD. The surge in document requests often signals a deeper issue: insufficient communication between boards and residents. It may be that the community has only one annual meeting and does not have a newsletter, so people truly do not know what’s happening within the community. To foster transparency, it might be time to consider opening the first half hour of board meetings to residents before going into executive session. Residents want to know what’s happening, and while some might seek information for contentious purposes, others simply want to stay informed. 

There will always be certain residents who are going to use this right for nefarious purposes, to second-guess the board, to find a “gotcha,” to try to obtain proprietary information for themselves or to try to find ammunition to use against the board at the next election. But there are others who truly use this right just to educate themselves.

The key lies in striking the right balance between transparency and protection of sensitive information. While increased openness can reduce document requests and improve community relations, boards must still maintain appropriate boundaries and protect confidential information.