New Law Allowing Remote Shareholder Attendance and Electronic Voting May Change … Everything!
Low attendance at Co-op annual or special shareholder meetings can result in a lack of a quorum and can delay or even prevent boards of directors from taking actions that require shareholder approval. Thus, co-op boards and shareholders alike may welcome a new law authorizing boards to permit remote shareholder attendance and electronic voting at co-op meetings. New Subsection “(b)” of NY Business Corporation Law Section 602, effective as of October 23, 2019, will likely increase shareholder participation and could forever change the shareholder meeting as we know it.
The new law allows boards to “implement reasonable measures to provide shareholders not physically present at a shareholders’ meeting a reasonable opportunity to participate in the proceedings …” (such as by “audio webcast or other broadcast”) and to “enable shareholders to vote or grant proxies … by means of electronic communication” (such as by “telephonic and internet voting”). In other words, shareholders must have a way to hear what is happening and to send in a contemporaneous vote. Boards implementing means for electronic participation must also (a) verify that participants are in fact shareholders of record, and (b) keep records of votes and other actions by shareholders participating by electronic means. In addition, the Board needs to confirm shareholder attendance and voting (possibly by an e-mail with a “read receipt”).
Of course, the new provisions do not “limit, restrict or supersede other forms of voting and participation,” and implementing measures for electronic participation may not guaranty 100% participation; however, doing so will likely reduce the impact of physical limitations such as shareholder immobility, scheduling conflicts or just plain inconvenience to some shareholders that can contribute to low meeting turnout. Thus, positive tangible impacts may include increasing chances of achieving a quorum and even the evasive “supermajority” vote required to amend co-op governing documents. Allowing electronic participation may also include speeding up the rate at which business is conducted and achieving voting results (including elections) that are representative of a higher percentage of the particular co-op community.
Let us know what YOU think …