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Funny Business in Elections

Q. We were informed in a letter dated June 11 by the management office of our co-op that our annual meeting would be on Wednesday, July 3, 2013. A proxy was not included. Since we hardly ever get notices from the board of our co-op, this was not unusual. We don’t know who our president is or anyone else on thee board for that matter.There were lots of concerns raised by the shareholders who attended the meeting.

At the end of the meeting we were handed a sheet of paper with lines. On it there were no names. We were told by the secretary of the management office to write the names of the three people who were presently on the board, two were present. And a fourth person stood up before we voted and expressed an interest in running for office and her credentials were very impressive. But before we voted I noticed that the person was taken out of the room by the secretary of the management office and a few minutes later they came back. We were told that from the four running, we could only vote for three.
We were to divide our shares equally among the three people we were voting for.
Afterwards we got an email and a notice on our door that stated the names on the board were the same as last year. This was a complete surprise to me because shareholders expressed things their dissatisfaction on the way things were being done or not being done. I did find out that when the fourth person was led out of the meeting room, she was told that she was not eligible to run for office because she was in arrears with her maintenance. They told her that it was in the bylaws. They held the voting without telling us that she could not run. So what has happened to y votes for her and everyone else’s who voted for her?

I looked and read the bylaws. There is nothing there that says she could not run. She is a shareholder. And all the shareholders of record were not given a chance to vote because a proxy was not issued. Is this legal? Is any of this legal?

-Dissatisfied Voter

A. An attorney at Adam Leitman Bailey P.C. says that, “As a shareholder of the cooperative, the writer has the right to know the identity of the directors and officers of the cooperative. The New York Business Corporations Law (the “BCL”), the statute that governs cooperative corporate governance in New York, mandates that a board shall provide a list of all of the directors and officers for review upon two days written demand by a shareholder.

“Regarding the meeting notice, the BCL is silent as to who must send meeting notices to shareholders. However, it is common for cooperative bylaws to mandate that a specific director or officer send meeting notices, the fact that management sent the notice does not render the notice defective. The BCL does prescribe the time within which the notice must be sent, which can be further limited by a cooperative’s bylaws. According to the BCL, notice must be sent within sixty days prior to a meeting. Therefore, since the writer’s cooperative provided twenty two days’ notice, unless the bylaws limit the notice period substantially, the fact that the notice arrived two days prior to the meeting does not render the notice defective. Further, since the writer attended the meeting without raising objection to the notice, any objection the writer may have had was deemed waived. Also note that the BCL does not require that a proxy be mailed with the notice of meeting – individual shareholders can write their own proxies.

“Regarding the disqualification of the fourth candidate, it is common for bylaws to set fourth qualifications for directors, including limiting candidates to those shareholders in good standing. However, if cooperative’s bylaws do not include such qualifications, it is improper for management to disqualify candidates on that basis.Therefore, since the writer states that bylaws do not include a qualification that candidates must be current on their maintenance payments, the management’s exclusion of the fourth candidate was improper.

“Regarding the allocation of votes, the writer explains that shareholders were allowed to vote for the fourth candidate, but management subsequently disqualified that candidate. Votes for that candidate were likely disregarded, but this issue is irrelevant because after the fourth candidate was disqualified there were only three candidates running for three director seats. Therefore, regardless of the spread of the votes, those three candidates would have been elected.

“Based on the foregoing, the writer’s grounds to challenge the election lie only in the fact that the fourth candidate was improperly disqualified. If the writer wishes to challenge the election, he or she should commence an action under Article 78 of the New York Civil Practice Law and Rules within 120 days of the election.”

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