Shareholders wrest power from entrenched Harlem Co-op board

22 October 2021 One of the most common complaints in cooperatives is it the plank takes control and never gives up and the board is working for itself and not for the good of the

22 October 2021

One of the most common complaints in cooperatives is it the plank takes control and never gives up and the board is working for itself and not for the good of the shareholders. In the vast majority of cases, this is not true. Typically, board members work very hard and shareholders keep electing the same board members because there is no general dissatisfaction with the way they do their jobs. But sometimes it is absolutely true that the board members act for themselves and have retained power by all means. This was the case in a small co-op in New York City, and the resulting court ruling in Siwana Green vs. Al Cristancho is a good example of what shareholders can do when this happens.

The cooperative of 67-69 avenue Saint-Nicolas. was led by Siwana Green and family members (the “Green group”) for at least 10 years. According to shareholders who filed the lawsuit in 2018, the Green Group retained control of the cooperative by failing to regularly annual meetings (he also did not have board meetings). The cooperative had a regulation provision that shareholders in arrears could not vote. The last annual meeting was held in 2014, and by manipulating shareholders’ eligibility to vote, the Green Group retained control.

In addition to these problems, the company was heavily in debt, owing more than a million dollars in property taxes and water and sewer charges, with a impending foreclosure on the building pursued by New York City. This was all the more embarrassing as during the same period it seemed that the cooperative was earning more $ 1 million unit sales and return taxes. Shareholders claimed that the Green Group was using these funds for its own personal gain.

Finally an election

The by-laws of the cooperative provided that a special meeting could be held if it was called by written notice to the shareholders and at least ten% of shareholders agreed to attend. Enough shareholders got together and called a special meeting to remove three members of the Green Group and elect replacement directors. Due to the fact that the current rental list was inaccessible or non-existent, a list of shareholders was difficult to establish. The shareholders brought Neighborhood housing services, a non-profit organization established to help and maintain affordable housing, which oversaw the meeting and acted as election inspectors. In order to establish which shareholders were eligible to vote (i.e. who had no arrears), shareholders were asked to provide proof of maintenance payments to the cooperative for the year. elapsed.

Ten shareholders attended the meeting (in person and by proxy), and nine of the ten were eligible to vote. Eight shareholders voted to remove the three directors of the Green Group from the board of directors (one shareholder abstained) and three new shareholders were elected. Former board members refused to recognize the new board or hand over any books, records, check books or any other documentation.

Contested election

The Green Group then sued the three people elected to the board of directors at the special meeting, demanding that the court overturn the election results and prevent them from exercising any of their rights as directors. . The Greens group claimed that there were three flaws with regard to the special meeting. He claimed that the the notice was faulty, since some shareholders did not have the right to vote; that some shareholders who voted were in fact not eligible vote; and that two of the three elected shareholders were not eligible.

The court rejected all of the Greens’ claims without a hearing. It is clear that the court was impressed that Neighborhood Housing Services certified the legitimacy of the meeting and the election. In addition, the court noted that not a single person voted to keep the Green group in power.

But perhaps more than anything, the court looked at the co-op’s dire financial situation and the actions (or lack thereof) of the Green Group. The court ruled that even if the Green Group could establish that the meeting did not comply with the articles of association of the company, the court would have rejected the request of the Green Group to cancel its dismissal from the board of directors “in the financial year. of the discretionary power of that tribunal. and the interests of justice. As the court noted, a majority of shareholders exercised their judgment and voted against the green group, and the court ruled that “their will should not be freely ignored.”

We often hear that a court’s decision is based on a detail and that form is as important as substance. In that decision, the court made it clear that the will of the people will prevail, even if there have been one or two technical errors. The substance, in this case, was more important than the form.

Andrew P. Brucker is a partner of the law firm Armstrong Teasdale. The statements and opinions contained in this article are its own and not necessarily those of the company.

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