Spotlight on: Getting to Know How a Board Works in Case You Want to Run
April 16, 2015 — You survived the mountain of paperwork, you scored your first mortgage, and you passed the board interview with flying colors. Congratulations, new shareholder! So now that you've had a chance to settle in to your brand new co-op apartment, how does a spot on the board sound to you? Well, maybe it's too soon. But since you've invested in co-op living, it's a good idea to familiarize yourself with the board and how it works — you will not only get insights on how the building is run and why but you may decide in future to throw your hat in the ring.
A guide to elections, proxies, and other concerns. The manner in which an annual meeting is conducted can make or break a new board. It is, therefore, imperative that both the legal formalities and the political niceties be scrupulously observed. There are ways to conduct a smooth, harmonious, productive, and legally valid meeting so that the board can begin its term without controversy, chaos, and litigation.
The annual meeting has three separate and distinct purposes:
- Providing owners with an update on the building's operation over the preceding year
- Conducting whatever votes are scheduled to occur, namely board elections and consideration of amendments to the association's governing documents
- Providing a forum for owners to ask questions or vent
A board's ability to comply with all pertinent legal requirements while simultaneously navigating these three disparate aspects of its annual meeting efficiently and with diplomacy will determine whether the aftermath will be smooth or chaotic.
In this week's Spotlight, we will take a look at timing and proxies.
The first legal requirement with which boards must be concerned is the nature and timing of the notice of meeting. This notice must be in written or electronic format, and is required to state the place, date, and hour of the meeting. The association's bylaws typically require that any such meeting must be held in the county where the building is located.
Many association bylaws also specify a date on or by which the annual meeting is to be held. While courts do not strictly enforce such a deadline, the Business Corporation Law provides aggrieved shareholders with a remedy in the event a board unduly delays sending a notice of the meeting.
The notice may not be served more than 60 or less than 10 days in advance of the meeting. It may be hand-delivered to the owner (sliding under the apartment door is unacceptable) or mailed to his/her official address or, if the owner has authorized electronic service, delivered in that manner. The date and method of service of notice must be documented with an affidavit by the person who effected the same. Untimely service or improper notice is sufficient in and of itself to expose the results of any annual meeting to legal challenge.
Notice of the annual meeting is typically accompanied by a proxy form enabling owners to designate others to vote in their place in the event they are unable to attend the meeting. (Proxy forms can either give the designee discretion to vote for whomever he wants or instruct the designee how to vote at the meeting.)
There is no legal requirement that the board provide owners with a proxy form. However, the more "user-friendly" a board makes its annual meeting package (i.e., by providing a proxy form and a letter of explanation, and possibly the names of all known candidates for board seats and their resumes), the less vulnerable to criticism it will be.
Atmospherics matter when it comes to planning and executing an annual meeting. The choice of timing and venue, the provision of amenities or failure to do so, and the manner in which information is presented all profoundly affect the tone of the gathering.
For example, if the board wishes to maximize turnout and avoid accusations that its timing was politically motivated, the meeting should be scheduled for 7 to 7:30 P.M. on a weeknight so that owners are likely to be in town and afforded adequate opportunity to arrive home from work. Moreover, meetings should not be scheduled during the months of July, August, and December or during holiday weeks, to minimize the prospect that owners will be on vacation.
Up next week: Venue
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