Legality: check your by-laws to see if board members MUST be shareholders. If not, it's legal.

As to ethical: as long as a board member fulfills his/her fiduciary responsibilities to the corporation, why not?

Even if the docs allow it [which seems unlikely], ex-shareholders [or soon to be ex-] inherently cannot think & act as shareholders, & should step down. If they have unique skills &/or knowledge which would be of value to the association, they can continue to contribute as volunteers, if they're willing...but they should not vote as owners.

check your bylaws and proprietary lease...chances are board members are required to be current shareholders.

As long as a person is still a "shareholder of record" - i.e., as long as a closing has not taken place at which his/her shares are transferred to someone else and for whom a new stock certificate is issued, that person can still be a board member if his/her term hasn't expired and s/he hasn't officially resigned from the board. You have to check your by-laws to see if a person who isn't a shareholder of record can be a board member.

Must a board member live in the building to serve on the board? We have a board member who lease out her unit and doesn't live here anymore.

Anonymous - check your by-laws. Ours which are the same that many co-ops have state that "it shall not be necessary that a director be a shareholder" - and also - "not less than a majority of directors to be elected...shall be residents of the building and unrelated to the sponsor and the holders of unsold shares." In our by-laws, this is in Article III, section 2.

Check your bylaws.

If they don't require a board member to live in the building, then let her/him serve. An investor is an investor, whether she lives there all the time, part-time or none of the time. That's because it's her money, not her presence, that makes her a shareholder.

She (or he) still has the same interest in seeing her investment increase in value no matter where she lives.

In fact, living somewhere else may be an advantage, because she can see other ways a residence is managed.

Finally, remember that New York State corporate law (which governs co-ops) prohibits treating any shareholder differently from the others. The courts consider it discrimination.

Nothing to do with discrimination ...
Your byLaws hold the answer...
However,as for sublets....
We have owners that live outside the building, and never intend to return. As oppose to being a positive force, they helped keep a board member (with his own agenda) on the Board who promised (and for many years succeeded) to help them keep thier lucurtive sub-lets --
A coop with high owner/occupation is considered a better investment by the bank and lenders... Also, renters (not all) do not have the same intrest in maintaing the building or keeping the peace with their neighbors. Good luck... VP

I said elsewhere ["They should not serve"] that board members should discontinue service once they sell, or determine that they will sell. I should have stipulated that living elsewhere--whether full-time or part-time--should NOT disqualify them from service. As Board Treasurer points out, the key factor is whether they maintain their investment in the property. As long as they have an equity stake, they're well-positioned to act in a fiduciary capacity.

Anonymous - Unless your by-laws say BMs must be Shs and all BMs must be residents, once your BMS close on their apt sales, they're no longer Shs and shouldn't be on the board.

Many by-laws say a "majority" of BMs must be residents. I agree with Board Treas that it's a person's money that makes him a Sh. But a coop isn't just a business corp. It's a home, a community where hopefully people get along, and a bldg that needs watchful eyes to ensure that residents treat it and each other with respect. If BMs don't live in the coop, they can't relate to that, and if they all they want is an investment, let them buy stocks, bonds, funds or CDs.

I also agree with Board Treas that Business Corp Law prohibits any Sh from being treated differently from the others. All SHs must be treated "fairly and equally". But if a BM must be a Sh, not letting someone be on the board who isn't a Sh is not discrimination.

We had the same problem,,, according to our bylaws, anyone could be on our board... A SH vote is usually needed to change the bylaw,,, so (if needed) put it on the SH meeting agenda,,, and vote to change the bylaw..