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Perspectives

Virtual Shareholder Meetings Are Now Authorized Permanently

An important event in a cooperative’s life each year is the annual meeting of shareholders, at which members of the Board of Directors are elected and important issues facing the cooperative may be discussed.  When necessary, special meetings of shareholders may also be convened.  During the coronavirus pandemic, it became impracticable and for a time unlawful for shareholders to meet in person.  Today, some shareholders still may feel uncomfortable meeting in person, especially in larger cooperatives that may have dozens or hundreds of shareholders.

To address this problem, the New York State Legislature adopted temporary legislation that authorized New York corporations, including cooperatives, to conduct their shareholder meetings using a virtual format until December 31, 2021.  Although many people initially questioned the practicality of conducting shareholder meetings online, especially when a contested election was involved, by now many of us have become more familiar with the logistics of holding a virtual annual meeting.  Not only have virtual shareholder meetings become relatively routine during the pandemic, but holding the meetings online yielded unexpected benefits.  A virtual meeting makes it possible for shareholders who could not attend a meeting in person, including those who may be ill or absent from New York, to participate in the meeting.  Even some shareholders who could attend in person still find it easier to “attend” from their apartment rather than gathering in a meeting hall or conference room.

The Legislature has now amended the Business Corporation Law (BCL) to make the authorization of virtual shareholder meetings permanent.  The decision whether to convene a shareholder meeting in person, online, or in a hybrid format (allowing both in-person and online participation) is the Board’s, unless a given cooperative’s By-Laws provide otherwise.  Meeting notices to shareholders must indicate the format by which the meeting will be held, and if applicable, must advise the means of electronic communications by which shareholders or proxyholders may participate in the meeting and how they may vote or grant proxies at the meeting.  For virtual or hybrid meetings, the Board must take reasonable measures to allow virtual participants a reasonable opportunity to participate in the meeting, including providing a live video or audio broadcast, providing a method for voting, verifying that those purporting to vote or give proxies are in fact shareholders, and keeping a record of all votes cast or other actions taken by shareholders at the meeting.  If the Board wants to hold a conventional shareholders’ meeting in person, it is still free to do so.

Many cooperatives will enlist the assistance of their managing agent or another commercial vendor in setting up the logistics for a virtual meeting, especially when a contested election is expected.

It should be noted that the BCL applies to the governance of cooperatives, but not to unincorporated condominiums.  The Legislature has not yet addressed the question of whether condominium unit owners may also meet virtually.  Another bill has been introduced in the Legislature that would confirm that they may, but it has not been enacted to date.  In the interim, while there is no specific statutory authority for a virtual unit owners’ meeting, the courts have historically applied relevant sections of the BCL to condominiums by analogy in many situations where the Condominium Act is silent, and it is likely they would again do so here.