How to Hold an Annual Shareholders Meeting of NY Residential Co-ops during the Coronavirus Crisis
In order to address the public health concerns and social distancing measures put into place to combat the Coronavirus pandemic, New York corporations, including residential co-operative corporations, have a couple of options for holding annual shareholder meetings.
The first option, made available under Governor Cuomo’s Executive Order No. 202.8, as amended by Executive 202.14 and further amended by Executive Order 202.29, permits New York corporations to hold virtual-only shareholders meetings through June 6, 2020. The executive order temporarily suspends subsection (a) of Section 602 and subsections (a) and (b) of Section 605 of the New York Business Corporation Law (“NY BCL”) “to the extent they require meetings of shareholders to be noticed and held at a physical location.” Given the current deadline of June 6th, this may not be a viable option, particularly in light of notice requirements for meetings, unless the deadline is further extended.
A second option, which has been available under an amendment to the NY BCL last year, is the so-called “hybrid” virtual shareholders meeting. While a less attractive and somewhat cumbersome option, it is something boards may want to consider.
Though New York’s corporation law does not provide for fully virtual shareholder meetings (except under the Governor’s emergency executive order), Section 602(b) of the NY BCL permits what is colloquially referred to as a “hybrid” virtual shareholder meeting. Under this procedure, the meeting must still be held at a physical place, at which shareholders must be offered the option to attend; but shareholders also would have the option to participate in the meeting electronically, provided that the board
“[R]easonable measures” under the statute, for shareholders not physically present to participate, include webcast, teleconferencing or streaming. Also, under the “verification” requirement, some means of confirming the identity of the participating shareholder is needed, such as being able to see the person or using an identification code. A record of who has participated in the meeting, both in person and virtually, also is important.
The requirement of a physical place for the meeting (which makes this a “hybrid,” as opposed to a completely virtual, meeting) would still need to be complied with, which means that shareholders would need to be given the option of going to the physical place where the meeting is held. This may defeat the goal of maintaining “social distancing,” but shareholders could be strongly encouraged to participate electronically, and the notice of the meeting could state that the meeting may be postponed if more than a certain number of people show up. Also, shareholder proxies may still be used, which has traditionally limited the number of attendees at shareholder meetings even before the current crisis.
Companies will remain subject to all applicable shareholder notice and disclosure requirements under the NY BCL, and, if applicable, any requirements of their charters and bylaws. Also, note that the two options described above pertain to corporations formed under the laws of New York. Other rules may apply if a corporation is formed under the laws of a different state. For example, many corporations based in New York are formed under the laws of Delaware which now permit fully virtual shareholder meetings, apart from any emergency orders which may apply.
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