For many Boards, the Covid-19 pandemic has thrown a monkey wrench into governance efforts, particularly with holding annual meetings and elections.
In New York, amendments to the Business Corporation Law and the Not-for-Profit Corporation Law temporarily allowing annual meetings via Zoom or other electronic platforms were signed into law. But what about those Boards who still haven’t had their annual meeting or election despite the electronic meeting provisions? It is time to get back on track because failure to do so could leave you exposed to potential litigation brought by individual members or shareholders seeking to compel the Board to hold an annual meeting and/or election.
We recently prevailed in an Article 78 proceeding brought on behalf of a condominium unit owner seeking to compel the Board to hold an election. There, the Board failed to hold an election for not one but nearly fifteen years, though the principle claim was the same: a failure to hold an annual election. While we don’t usually represent individual homeowners in claims against community association boards, this case was just too compelling and egregious to ignore.
An Article 78 proceeding operates on a short time frame, and a court’s order or decision will likely be issued quickly in comparison to an action commenced as a breach of contract claim, for example.
In rendering a decision and order, the court will look at whether the facilitation of a meeting and election is a ministerial act that the Board is compelled to take pursuant to the association’s declaration and by-laws. If the court finds that a Board is required to hold an annual meeting and election according to the governing documents and/or the law, and there is no discretion given to the Board in those documents as to whether to hold a meeting/election, then it is likely that the member/shareholder will prevail.
The bottom line is that failure to hold a meeting or election that a Board is required to hold according to its governing documents may lead to unnecessary litigation if there is a member/shareholder expecting or requesting one.
As we wait for Governor Hochul to sign the bills before her making permanent those temporary electronic meeting provisions, the temporary laws are still in effect until December 31, 2021. While Covid-19 might have served as a valid excuse last year, it is unlikely to be successful today, especially with the availability of virtual meetings.
