Shareholder Elections in a New York Co-op
Housing cooperatives are often formed pursuant to the State of New York’s Business Corporation Law (the “BCL"). The BCL section 601 states that the “initial by-laws of a corporation shall be adopted by its incorporator… at the organization meeting." NY BUS CORP sec. 601(a). By-laws are a co-op’s internal operating rules by mapping out how decisions are made within the co-op, how directors are elected shareholders and directors rights and responsibilities.
The BCL also states that a “meeting of shareholders shall be held annually for the elections of directors and the transaction of other business on a date fixed by or under the by-laws." NY BUS CORP sec. 602(b). The co-op’s by-laws will specifically state the by which this “annual shareholder’s meeting" will be called including the place of the meeting, how notice of the meeting should be given, and how many shareholders are necessary to be present to validate the election. The by-laws also explain the number directors for the co-op and the duties of the officers.
Problems arise when the Board fails to call the annual meeting. If this occurs, the BCL gives shareholders the power to call their own elections for the co-op. According to the BCL, a special election may be called by 10% of the shareholders entitled to vote. The law describes this as holders of 10% of the shares but often co-ops however sometimes a co-op’s by-laws give each shareholder an equal vote.
The procedure to call the meeting as well as the requirements to be eligible to vote in the election is also described in the by-laws. As long as the necessary number of eligible voters, either in person or by proxy, is present at the meeting called by the shareholders, the election will be valid.
Holding a new election in the co-op is only the first step however. If there is a general disinterest in governing the cooperative, the newly elected board will have to work together to develop a strategy to keep the co-op healthy and its residents secure.