The future of fully virtual annual meetings is cloudy
In the last 15 months, councils of cooperatives and condominiums and residents overcame their initial apprehension and learned to kiss virtual annual meetings. Our experience is that virtual annual meetings have increased presence of owners and reduces the time (and related expenses) to conduct the meeting. And the feedback from shareholders and unitholders has been enthusiastic. However, boards should be aware that the expiration of COVID-Emergency orders related to restrictions will result in the continuation of virtual annual meetings.
Even before the pandemic, the boards of directors of cooperatives had the power under section 602 of the Commercial company law (BCL) to allow shareholders to attend annual or extraordinary meetings virtually or by telephone. However, this section did not allow a 100% virtual meeting of shareholders; instead, the law allowed councils to have a “Hybrid meeting”, where shareholders could decide to attend virtually, by phone or in person.
Due to the pandemic and social distancing requirements, Governor Andrew M. Cuomo adopted Executive Decree 202.8, which suspended the BCL’s requirement that shareholders’ meetings be convened and held in a physical location. This enabled the boards of directors to hold shareholder meetings with exclusively virtual and telephone participation. Although this ordinance was annulled, the governor signed a law which amended Article 602 of the BCL to provide that “for the duration of the state of emergency disaster declared by [Executive Order 202] … Or until December 31, 2021, whichever is later ”, a board of directors“ may, in its sole discretion, determine that the meeting [of shareholders] will be held only by electronic communication, the platform / service of which will be the meeting place for the purposes of this article.
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Since the cancellation of the state of emergency in the event of a disaster June 25, 2021, cooperatives can hold 100% virtual shareholder meetings up to December 31, 2021. Unless the BCL is changed again, as of January 1, 2022, the boards of directors of cooperatives will have the option of holding a shareholders’ meeting in person only or having a hybrid meeting which shareholders can attend. in person or virtually.
Although there is no analogue to section 602 in the Co-ownership law, and since no decree addressed annual meetings of condominium owners, many condominiums nonetheless held virtual annual meetings during the pandemic. The power to organize virtual meetings of unit owners can be inferred from the fact that decrees have made it illegal to hold large gatherings in person and that courts, in other contexts, have applied the BCL in cases where the condominium law was silent. However, since the decrees restricting indoor gatherings were repealed, the power of condominium boards to continue to hold virtual owner meetings is questionable, and condominium councils that want to allow owners to continue participating in the meetings. meetings virtually or by phone should modify their statutes to ensure the legality of such meetings. It is not uncommon for condominium bylaws to allow modification by written consent, it is therefore possible for a board to seek the approval of unit owners for a virtual format before sending the notice of the next annual meeting.
Unless the BCL changes further, cooperatives cannot modify their statutes to provide for 100% virtual annual meetings, since article 602 of the BCL requires that shareholders’ meetings take place in a physical location after December 31, 2021. Therefore, the only option available to co-op boards is to allow shareholders to participate virtually in the annual meeting in person.
Scott S. Greenspun is a director and Maria boboris is associated with the law firm Braverman Greenspun.