Boards Should Continue to Document Their Decision-Making
Cooperative and condominium boards are being faced with important decisions. Among other things, boards may decide to suspend certain services, close facilities, postpone move-ins and move-outs, and take other actions that are designed to safeguard everyone’s health but may inconvenience some residents. Board decisions made in good faith for the benefit of the shareholders or unit owners will ordinarily be protected by the Business Judgment Rule.
To maximize the chances of such protection, however, the board should be sure to properly document its decision-making. This is ordinarily done in the board minutes. In addition to face-to-face meetings that are not practicable at this time, boards may also meet by telephone or video conference, provided that proper advance notice of the meeting is given to (or waived by) all board members. Such a telephonic meeting is equally effective as an in-person meeting and meeting minutes should be prepared just as for any other type of meeting.
An Executive Order also authorizes certain corporate actions to be taken by electronic means, such as e-mail, during the emergency (currently through April 19, 2020, but likely to be extended). Where the nature of the action calls for board approval, the documents should reflect that approval was obtained at a telephonic board meeting.
Another issue confronting many boards is the scheduling of annual shareholder or unit owner meetings, since many by-laws provide for the annual meeting to take place in May or June. It would be inappropriate to schedule an annual meeting to be held in person while the Executive Order prohibiting public gatherings remains in force, and perhaps even thereafter. Another Executive Order temporarily suspends the requirement that shareholder meetings be held in a physical location. This could permit such meetings to be held by conference call, which might be practicable for relatively small buildings but unfeasible for larger ones. If a board decides that it would be impossible or impracticable to hold the annual meeting around the time specified in the by-laws, it should consult with counsel.