We have previously discussed the duties and obligations co-op and condo board members owe to shareholders and owners, but what information needs to be disclosed and how transparent should boards be? What information can shareholders and owners access and what is off limits? First and foremost, it is important for residents to know their rights.
Co-op shareholders have the right, pursuant to Section 624 of the New York Business Corporation Law (BCL), New York common law, and generally their proprietary lease, to inspect the corporate books and records. It has been held that co-op shareholders have the same legal rights to documents as shareholders in other public and closely–held corporations doing business in the State of New York. Therefore, co-op shareholders have the intrinsic right to protect their largest investment – their property. So what information generally must be disclosed to these shareholders? Documents such as meeting minutes, profit and loss statements, shareholder list, and accounting and bank statements. When requesting the board’s books and records, shareholders typically need to submit an affidavit confirming that they have not attempted to sell their unit in the past five years to avoid potential conflict.
Under the Condominium Act Section 339-w, condo owners have the right to examine the books of receipts and expenditures of the condo. The provision specifies that “[s]uch records and the vouchers authorizing the payments shall be available for examination by the unit owners at convenient hours of weekdays. A written report summarizing such receipts and expenditures shall be rendered by the board of managers to all unit owners at least once annually.” Recently the courts have applied the rights of shareholders to condo owners, whereby condo owners, who are acting in good faith, may retrieve documents such as “monthly financial reports, building invoices, board meeting minutes and legal invoices”.
However, there are limitations on shareholders’ and owners’ rights to inspect the books and records. Certain documents contain confidential information that should not automatically be disclosed. This problem often arises in regards to board meeting minutes. If a shareholder or unit owner requests access to minutes that contain confidential information, the board may be able to make redactions, particularly if the information is “embarrassing or prejudicial”. On January 1, 2018, Section 727 of the BCL will be in effect, which expands the scope of board transparency. Section 727 states that every condominium or cooperative housing corporation is required to submit an annual report to the shareholders including information of all contracts made, entered into, or voted on by the board, and the relevant details of those contracts. As statutes and common law evolve, it is important for boards to practice greater transparency so that they are in compliance with the law and avoid potential conflicts and litigation.
 Guzov, LLC. (May 4, 2017) “Guzov, LLC Protects Co-op Shareholders’ Right to Safeguard Investment through New York Supreme Court Ruling.” Available at: http://guzovllc.com/supreme-court-protects-co-op-shareholders-right-safeguard-investment/.
 Condominium Act Section 339-w. Available at: https://law.justia.com/codes/new-york/2010/rpp/article-9-b/339-w/. Accessed on Dec. 22, 2017.
 Odenthal, Mike. (Nov. 9, 2017) “How Transparent Should Boards Be” The Cooperator New York. Available at: https://cooperator.com/article/a-board-beholden/full#cut. Accessed on Dec. 22, 2017.
 BCL Section 727. Available at: https://www.nysenate.gov/legislation/laws/BSC/727. Accessed on Dec. 22, 2017.