The New York City co-operative corporation and condominium community is approaching the 2020 annual shareholder/unit owner meeting season.
Questions are naturally arising as to how to conduct shareholder/unit owner meetings in light of the current novel coronavirus/Covid-19 pandemic. Alternatives to in-person Annual Meetings are available in various ways.
A series of executive orders have been issued by Governor Andrew Cuomo under the New York on PAUSE (Policy that Assures Uniform Safety for Everyone) doctrine.
Obviously, physical gatherings of people should be discouraged until it is safe for these meetings to occur.
So, what are the alternatives to Co-op/Condo Meetings in the Age of Covid-19?
a. Postpone the Meeting
The simplest solution is to postpone the meeting until it is safe to hold it. Clearly, a postponement for a public safety purpose is consistent with New York on Pause orders.
Most co-op/condo by-laws have language to the effect that the term of a director/manager shall continue until a successor is elected. That means the current directors/managers can continue to act as such during any reasonable postponement of an annual meeting.
Without doing a detailed analysis of Article 6 of New York’s Business Corporation Law, suffice it to say that BCL §602 and §603 operate, in the face of unreasonable annual meeting postponements, to authorize certain actions to compel annual meetings. But the remedies are mostly limited to going to Court for injunctive relief. And what Court would enforce such an order during current circumstances?
If there is no issue requiring short-term shareholder/unit owner input, perhaps a simple postponement works and is the cheapest alternative.
On the downside of a postponement recommendation: No one knows when things will be sufficiently back to “normal” to allow for a safe physical annual meeting.
b. Hold a Virtual Annual Meeting
If a co-op/condo wants to proceed with a virtual meeting it can do so.
Most co-op/condo by-laws speak to an annual meeting occurring at a time and place designated by a co-op/condo officer. However, the Governor’s executive PAUSE order No. 202.8, appears to have suspended that “physical time and place” requirement. The suspension of that requirement was extended through to May 15, 2020 by the Governor’s executive order No. 202.18.
I say above that the Governor’s order “APPEARS to have suspended that ‘physical time and place requirement’” because his executive orders suspend the application of Business Corporation Law (“BCL”) §605 to the extent the statute requires “…meetings of shareholders to be noticed and held at a physical location..”
However, most co-op/condo by-laws also require that the time and place be fixed for an annual meeting. In other words, would the Governor’s orders, which provide cover from the requirements of the statute extend to provide the same cover from a co-op/condo’s internal by-laws? We think so under the current circumstances, but Covid-19 issues are so new that we cannot not offer a more definitive assurance than our gut feeling at this time.
Fortuitously, in October, 2019, a new amendment to BCL §602 became effective as follows”
“(b)(i) A corporation may, if authorized by the board of directors: (1) implement reasonable measures to provide shareholders not physically present at a shareholders’ meeting a reasonable opportunity to participate in the proceedings of the meeting substantially concurrently with such proceedings; and/or (2) provide reasonable measures to enable shareholders to vote or grant proxies with respect to matters submitted to the shareholders at a shareholders’ meeting by means of electronic communication; provided that the corporation shall, if applicable, (A) implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of electronic communication is a shareholder of record and (B) keep a record of any vote or other action taken by a shareholder participating and voting by means of electronic communications at a shareholders’ meeting. A shareholder participating in a shareholders’ meeting by this means is deemed to be present in person at the meeting.
(iii) For purposes of this paragraph, ‘reasonable measures’ with respect to participating in proceedings shall include, but not be limited to, audio webcast or other broadcast of the meeting and for voting shall include but not be limited to telephonic and internet voting.” (emphasis supplied)
In fact, this may set up an annual meeting template, which may serve well for shareholder/unit owner meetings even after the pandemic has passed.
This would require (a) a Board resolution to authorize, and (b) a third-party webcast service, such as Zoom, Adobe Connect, GotoWebinar, etc. to enable shareholders/unit owners to join the meeting. There are a lot of vendors which offer this service.
There are logistical issues involved in: (i) voting (particularly if some degree of voter anonymity is sought), (ii) shareholder/unit owner identification/verification, (iii) taking questions from shareholders/unit owners, (iv) oral Board/committee reports by people not in physical attendance, (v) oral communications from shareholders/unit owners being heard by other shareholders/unit owners such as nomination speeches, questions and answers, etc. It may make sense to engage an information technology consultant familiar with the chosen webcast program to work these issues through.
Also, for virtual meetings, it may make sense to look closely at otherwise normal procedures. Perhaps, the Board should forego nomination and candidate speeches, conduct questions and answers only in writing, etc.
Note that the new law allows for virtual attendance at an already scheduled shareholder/unit owner meeting. That means an actual annual meeting has to physically occur somewhere. However, we see no reason why attendance at that meeting cannot be limited to no more than a few board members (maintaining social distance) and the IT consultant.
c. Meeting By Proxy
Another alternative to in-person Co-op/Condo meetings in the Age of Covid-19 is one could always theoretically conduct a meeting entirely by proxy. But logistical complications likewise present themselves.
For example, suppose a shareholder/unit owner who gave his proxy changes his mind, revokes his proxy and insists on attending? Or, as a practical matter, suppose the co-op/condo fails to secure a large number of proxies?
Others in the New York co-op/condo community have suggested a “token” meeting in a Board member’s apartment with the understanding that all other shareholders/unit owners will appear by proxy only. In other words, the annual meeting will occur, but word is put out that shareholder/unit owner personal attendance is not desired, and only representation by proxy is acceptable.
It’s more a political than a legal judgment to make. A “token” meeting could work but it has its risks, even in the face of what the Board may think is a quiet and noncontroversial meeting agenda.
Shareholders/unit owners sometimes have their own ideas as to what issues need to be addressed at an annual meeting. Pandemic related issues, and the Board’s actions in response, could likely take center stage at an annual meeting this year.
So, the cautionary note here: Care should be taken that the Board has an accurate read of the shareholder/unit owner mood before they pursue this possibility.
About Proxy Language
Many standard form co-op/condo annual meeting proxies have language to the effect that the shareholder/unit owner giving the proxy can still attend the annual meeting and vote. This is good standard language to have in a proxy during normal times.
However, the language can be construed as an invitation for the shareholder/unit owner to physically attend the annual meeting, when social distancing restrictions seek the opposite objective.
It may be prudent this year to re-visit standard proxy language in view of the New York on Pause restrictions.
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Doug Wasser
212-430-6040