NY State Senate Bill 2021-S4595

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 05, 2022	referred to corporations, authorities and commissions
Feb 05, 2021	referred to corporations, authorities and commissions

co-Sponsors

2021-S4595 (ACTIVE) - Details

Current Committee:: Senate Corporations, Authorities And Commissions
Law Section:: Cooperative Corporations Law
Laws Affected:: Add Art 9 Title 1 §139, Title 2 §§140 - 144, Title 3 §§150 - 154, Coop Corps L

2021-S4595 (ACTIVE) - Summary

Increases transparency in cooperative housing corporations by giving shareholders more rights to information of the co-op and limiting the powers of management companies and boards.

2021-S4595 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S4595

SPONSOR: MAYER
 
TITLE OF BILL:

An act to amend the cooperative corporations law, in relation to
increasing transparency in cooperative housing corporations

 
PURPOSE OR GENERAL IDEA OF BILL:

Enacts reforms in corporate governance and transparency of cooperative
housing corporations.

 
SUMMARY OF PROVISIONS:

Section 1 adds a new ARTICLE 9 to the cooperative corporations law to
make a number of changes to the way cooperative housing corporations are
governed.

Title I of the new ARTICLE 9 (new section 139 of the cooperative corpo-
rations law) permits cities with populations of one million or more to

opt out of the provisions of this legislation.  Title II of the new
ARTICLE 9 creates new sections 140-145:

* Section 140 makes reference to the business corporation law to clarify
that this new ARTICLE 9 supersedes any conflicting provisions of the
business corporation law.

* Section 141 establishes certain definitions.

* Section 142 permits shareholders, after at least 501 of all units in a
cooperative have been sold, to remove a cooperative's management company
by majority vote.

* Section 143 requires the board of a cooperative to meet at least once
each fiscal quarter, that all board and shareholder meeting minutes be
made available to shareholders within one week of the respective meet-
ing, and that the board submit an annual budget to shareholders for
approval by majority vote prior to each new fiscal year.

* Section 144 prohibits affiliates of management companies from serving
on the board.

Title III of the new ARTICLE 9 creates new sections 146-151:

* Section 150 establishes the title of Title III to be the "cooperative
shareholder protection act."

* Section 151 establishes certain definitions.

* Section 152 requires that (1) any non-emergency capital expenditure in
excess of $50,000 receive prior approval by the board of directors, and
(2) that cooperatives adhere to a procedure set forth in the bylaws for
soliciting and accepting bids for capital improvements, renovations, and
repairs in excess of $50,000, including that bids be provided to the
board in unredacted form prior to any action to approve a bid.

* Section 153 requires that (1) all financial reports provided to share-
holders be in plain language, and (2) itemize receipts of all expendi-
tures be submitted to the treasurer, retained for seven years, and made
available to shareholders and residents upon three business days'
notice.

* Section 154 requires that any official notices of violation by the
cooperative of any law, code, ordinance, rule, regulation, or order be
made available to all shareholders within one week of receipt, and that
any responses thereto likewise be made available to all shareholders and
residents within one week of when the response is made.

Section 2 sets the effective date.

 
JUSTIFICATION:

In many New York State metropolitan areas, prices for homes are cost
prohibitive and affordable rentals are scarce. Cooperative housing is a
wonderful option for many residents looking to invest in a community.
However, current laws governing cooperatives present challenges for
shareholders and can undermine their confidence in the governance of
their home and investment. Unless there is overt abuse of corporate
power, financial malfeasance, or blatant legal problems with the cooper-
ative board or management company, there are limited protections for
both shareholders and residents. The cooperative shareholder is in the
unique situation of being an owner of a property where they reside with-
out adequate laws for ensuring they have information from, and control
over, management of the living space which they own.

Many cooperative shareholders express frustration that their access to
information is limited and that management companies, which are entities
hired to help run cooperatives, have conflicts of interest or use their
power to exclude shareholders from important decisions.  For example,
shareholders and residents are frequently kept in the dark about expen-
sive capital improvements and excluded from decision-making and control.
When shareholders suspect financial mismanagement, they often struggle
to gain access to financial information, sometimes even in violation of
law, with little recourse.  To address these mostly unmitigated diffi-
culties, this bill enacts broad-scale reforms to enhance protections for
cooperative housing shareholders and residents by implementing substan-
tial modifications to current laws relating to corporate governance and
transparency.  One of the primary thrusts of this legislation is to
reign in management companies by reducing opportunities for abuse.

Specifically, allowing shareholders to fire a management company by
majority vote, and by limiting affiliates of management companies from
serving on the board of directors, this bill reduces their ability to
obfuscate and/or control operations, expenses, and management to the
detriment of the shareholders and residents. The bill also improves
oversight of management company operations by requiring non-emergency
capital projects over $50,000 to be approved in advance by the board,
that all bids on projects over $50,000 be solicited and considered under
a set procedure, and that the board receive full disclosure of bid
details prior to any action to approve a project.

Shareholder access to information and oversight powers are other realms
in which cooperative housing law requires increased protections. While
shareholders nominally enjoy rights to certain information under the
business corporation law, procedures for exercising those rights are
difficult and time-consuming, requests for information are routinely and
improperly denied, and enforcing such rights often entails protracted
legal action and substantial expense. This bill addresses these inade-
quacies by requiring that:

1. all financial reports be in plain language;

2. an annual budget be submitted at least one month before the beginning
of the fiscal year for approval by the shareholders;

3. board and shareholder meeting minutes be made available to sharehold-
ers;

4. itemized receipts be obtained for all expenses, retained for at least
seven years, and made available to shareholders upon request; and

5. notices of any legal violation by the cooperative, and any response
thereto, be made available to shareholders.  Within some cooperatives,
Boards of directors cause undue difficulties for shareholders and resi-
dents attempting to become more involved with or informed about cooper-
ative governance and finances. To combat a lack of oversight and other
challenges shareholders face, this bill requires board meetings to be
held at least once each fiscal quarter so that board members are more
engaged in managing the cooperative.  Boards can also make it difficult
for shareholders to enforce their rights. As mentioned above, by requir-
ing that minutes of board meetings (as well as shareholder meetings) be
made available to shareholders, this bill gives shareholders increased
access to information regarding cooperative management matters, which
they can use to conduct better oversight of both board and management
company activities, and thereby understand and, when necessary, shine
light on mismanagement and improper actions.

 
PRIOR LEGISLATIVE HISTORY:

None

 
FISCAL IMPLICATIONS:

None to the state

 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it

2021-S4595 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4595
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                             February 5, 2021
                                ___________
 
 Introduced  by  Sen.  MAYER  -- read twice and ordered printed, and when
   printed to be committed to the Committee on Corporations,  Authorities
   and Commissions
 
 AN  ACT  to  amend  the  cooperative  corporations  law,  in relation to
   increasing transparency in cooperative housing corporations

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The cooperative corporations law is amended by adding a new
 article 9 to read as follows:
                                 ARTICLE 9
                     COOPERATIVE HOUSING CORPORATIONS
 TITLE I.   APPLICABILITY.
       II.  COOPERATIVE HOUSING CORPORATION STRUCTURE.
       III. COOPERATIVE SHAREHOLDER PROTECTION ACT.
 
                                  TITLE I
                               APPLICABILITY
 SECTION 139. APPLICABILITY.
   §  139.  APPLICABILITY.  ANY  CITY WITH A POPULATION OF ONE MILLION OR
 MORE SHALL BE PERMITTED TO OPT OUT OF THE PROVISIONS OF THIS ARTICLE.

                                 TITLE II
                 COOPERATIVE HOUSING CORPORATION STRUCTURE
 SECTION 140. APPLICABILITY OF BUSINESS CORPORATION LAW.
         141. DEFINITIONS.
         142. ADDITIONAL POWERS OF MEMBERS.
         143. MEETINGS; BUDGET.
         144. SERVICE OF EMPLOYEES OF MANAGEMENT COMPANIES ON  THE  BOARD
                PROHIBITED.
   §  140. APPLICABILITY OF BUSINESS CORPORATION LAW. IF ANY PROVISION OF
 THE BUSINESS CORPORATION LAW CONFLICTS WITH ANY PROVISION OF THIS  ARTI-
 CLE,  THE  PROVISION  OF THIS ARTICLE SHALL PREVAIL, AND THE CONFLICTING
 PROVISION OF THE BUSINESS CORPORATION LAW SHALL NOT APPLY IN SUCH  CASE.
 IF  ANY  PROVISION  OF  THIS ARTICLE RELATES TO A MATTER EMBRACED IN THE

 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD08599-03-1

 S. 4595                             2
 
 BUSINESS  CORPORATION  LAW  BUT  IS  NOT  IN  CONFLICT  THEREWITH,  BOTH
 PROVISIONS SHALL APPLY.
   §  141.  DEFINITIONS.  FOR  THE  PURPOSES OF THIS TITLE, THE FOLLOWING
 TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   1. "COOPERATIVE HOUSING CORPORATION" MEANS A CORPORATION FORMED PURSU-
 ANT TO THIS CHAPTER OR ARTICLE FOUR OF THE BUSINESS CORPORATION LAW THAT
 OWNS OR LEASES RESIDENTIAL PREMISES AND OPERATES THE SAME ON  A  COOPER-
 ATIVE BASIS.
   2.  "MANAGEMENT  COMPANY"  MEANS A PERSON, FIRM, CORPORATION, PARTNER-
 SHIP, ASSOCIATION, LIMITED LIABILITY COMPANY, OR OTHER  ENTITY  RETAINED
 BY  A  COOPERATIVE  HOUSING  CORPORATION TO CONDUCT THE BUSINESS OF SUCH
 CORPORATION, INCLUDING BUT NOT LIMITED TO, OPERATING THE PREMISES, KEEP-
 ING THE BOOKS AND RECORDS,  MANAGING  DWELLING  UNIT  TRANSACTIONS,  AND
 TAKING SUCH OTHER ACTIONS AS MAY BE NECESSARY FOR COMPLIANCE WITH APPLI-
 CABLE LAW.
   3.  "RESIDENT" MEANS AN INDIVIDUAL MAINTAINING A PLACE OF RESIDENCE IN
 A DWELLING UNIT ON THE PREMISES OF A COOPERATIVE HOUSING CORPORATION.
   4. "MEMBER" MEANS A NATURAL PERSON HOLDING A MEMBERSHIP IN  A  COOPER-
 ATIVE HOUSING CORPORATION, WHETHER EVIDENCED BY A CERTIFICATE OF MEMBER-
 SHIP  OR BY A CERTIFICATE OF STOCK OR BY OTHER AUTHORIZED MEANS OF IDEN-
 TIFICATION.
   § 142. ADDITIONAL POWERS OF MEMBERS. AFTER THE FIRST DATE ON WHICH THE
 SPONSOR OF A COOPERATIVE HOUSING CORPORATION OWNS LESS THAN  A  MAJORITY
 OF  ALL DWELLING UNITS OPERATED BY SUCH COOPERATIVE HOUSING CORPORATION,
 THE HOLDERS OF A MAJORITY OF THE SHARES HELD  BY  ALL  MEMBERS  MAY,  BY
 ACTION DULY TAKEN PURSUANT TO EITHER SECTION SIX HUNDRED FOURTEEN OR SIX
 HUNDRED  FIFTEEN  OF THE BUSINESS CORPORATION LAW, REMOVE ANY MANAGEMENT
 COMPANY OF SUCH COOPERATIVE HOUSING CORPORATION FROM  SUCH  SERVICE  AND
 MAY PROHIBIT SUCH MANAGEMENT COMPANY FROM SERVING IN SUCH CAPACITY THER-
 EAFTER.
   §  143.  MEETINGS;  BUDGET.  1. MEETINGS OF THE BOARD OF A COOPERATIVE
 HOUSING CORPORATION SHALL BE HELD AT LEAST FOUR TIMES EACH  FISCAL  YEAR
 WITH  AT  LEAST  ONE  MEETING IN EACH FISCAL QUARTER.   MEMBERS SHALL BE
 PERMITTED TO BE PRESENT AT ALL SUCH  BOARD  MEETINGS  EXCEPT  WHEN  SUCH
 BOARD MEETS IN EXECUTIVE SESSION.
   2.  COMPLETE  MINUTES  OF  ALL  MEETINGS OF THE BOARD OF A COOPERATIVE
 HOUSING CORPORATION AND/OR MEMBERS THEREOF SHALL BE  MADE  AVAILABLE  TO
 MEMBERS NO LATER THAN ONE MONTH AFTER SUCH MEETING.
   3.  THE  BOARD  OF  A  COOPERATIVE HOUSING CORPORATION SHALL SUBMIT AN
 ANNUAL DETAILED BUDGET TO THE MEMBERS ONE MONTH PRIOR TO THE END OF SUCH
 COOPERATIVE HOUSING CORPORATION'S FISCAL YEAR. SUCH BUDGET SHALL  BE  IN
 PLAIN LANGUAGE AND SUBJECT TO APPROVAL BY A MAJORITY OF MEMBERS.
   §  144.  SERVICE  OF  EMPLOYEES  OF  MANAGEMENT COMPANIES ON THE BOARD
 PROHIBITED. NO COOPERATIVE HOUSING CORPORATION SHALL PERMIT AN EMPLOYEE,
 OFFICER, DIRECTOR, REPRESENTATIVE OR AGENT OF ANY MANAGEMENT COMPANY  OF
 SUCH  COOPERATIVE  HOUSING CORPORATION THAT IS NOT BOTH A RESIDENT AND A
 SHAREHOLDER TO SERVE ON THE BOARD.
 
                                 TITLE III
                  COOPERATIVE SHAREHOLDER PROTECTION ACT
 SECTION 150. SHORT TITLE.
         151. DEFINITIONS.
         152. RESTRICTIONS  ON  CAPITAL  IMPROVEMENTS,  RENOVATIONS   AND
                REPAIRS.
         153. DISCLOSURE OF EXPENSES.
         154. AVAILABILITY OF OFFICIAL NOTICES AND REPORTS.

 S. 4595                             3
 
   §  150. SHORT TITLE. THIS TITLE SHALL BE KNOWN AND MAY BE CITED AS THE
 "COOPERATIVE SHAREHOLDER PROTECTION ACT".
   §  151.  DEFINITIONS.  FOR  THE  PURPOSES OF THIS TITLE, THE FOLLOWING
 TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   1. "COOPERATIVE HOUSING CORPORATION" MEANS A CORPORATION FORMED PURSU-
 ANT TO THIS CHAPTER OR ARTICLE FOUR OF THE BUSINESS CORPORATION LAW THAT
 OWNS OR LEASES RESIDENTIAL PREMISES AND OPERATES THE SAME ON  A  COOPER-
 ATIVE BASIS.
   2.  "MANAGEMENT  COMPANY"  MEANS A PERSON, FIRM, CORPORATION, PARTNER-
 SHIP, ASSOCIATION, LIMITED LIABILITY COMPANY, OR OTHER  ENTITY  RETAINED
 BY  A  COOPERATIVE  HOUSING  CORPORATION TO CONDUCT THE BUSINESS OF SUCH
 CORPORATION, INCLUDING BUT NOT LIMITED TO, OPERATING THE PREMISES, KEEP-
 ING THE BOOKS AND RECORDS,  MANAGING  DWELLING  UNIT  TRANSACTIONS,  AND
 TAKING SUCH OTHER ACTIONS AS MAY BE NECESSARY FOR COMPLIANCE WITH APPLI-
 CABLE LAW.
   3.  "RESIDENT" MEANS AN INDIVIDUAL MAINTAINING A PLACE OF RESIDENCE IN
 A DWELLING UNIT ON THE PREMISES OF A COOPERATIVE HOUSING CORPORATION.
   4. "MEMBER" MEANS A NATURAL PERSON HOLDING A MEMBERSHIP IN  A  COOPER-
 ATIVE HOUSING CORPORATION, WHETHER EVIDENCED BY A CERTIFICATE OF MEMBER-
 SHIP  OR BY A CERTIFICATE OF STOCK OR BY OTHER AUTHORIZED MEANS OF IDEN-
 TIFICATION.
   § 152. RESTRICTIONS ON CAPITAL IMPROVEMENTS, RENOVATIONS AND  REPAIRS.
 1.  ALL  NON-EMERGENCY CAPITAL IMPROVEMENTS, RENOVATIONS, AND REPAIRS TO
 PREMISES OPERATED BY A COOPERATIVE HOUSING  CORPORATION  FOR  WHICH  THE
 COST TO SUCH COOPERATIVE HOUSING CORPORATION IS IN EXCESS OF FIFTY THOU-
 SAND DOLLARS SHALL REQUIRE PRIOR APPROVAL OF SUCH ACTION BY THE BOARD OF
 DIRECTORS  IN COMPLIANCE WITH SECTION SEVEN HUNDRED FOUR OF THE BUSINESS
 CORPORATION LAW.
   2. A COOPERATIVE HOUSING CORPORATION SHALL MAINTAIN AND  ADHERE  TO  A
 PROCEDURE,  AS SET FORTH IN THE BYLAWS, FOR SOLICITING BIDS FOR ALL NON-
 EMERGENCY CAPITAL IMPROVEMENTS, RENOVATIONS AND REPAIRS  FOR  WHICH  THE
 COST  TO THE COOPERATIVE HOUSING CORPORATION IS IN EXCESS OF FIFTY THOU-
 SAND DOLLARS.  SUCH PROCEDURE SHALL REQUIRE THAT ALL BIDS RECEIVED SHALL
 BE PROVIDED IN AN UNREDACTED FORM TO ALL DIRECTORS PRIOR TO  ANY  ACTION
 BEING  TAKEN  OR ANY APPROVAL TO AUTHORIZE ANY SUCH CAPITAL IMPROVEMENT,
 RENOVATION OR REPAIR IN ACCORDANCE WITH SUBDIVISION ONE OF THIS  SECTION
 IS MADE.
   §  153.  DISCLOSURE  OF EXPENSES. ANY FINANCIAL REPORT PROVIDED TO THE
 MEMBERS SHALL BE IN PLAIN LANGUAGE.  ITEMIZED RECEIPTS OF  ALL  EXPENDI-
 TURES  OF  A  COOPERATIVE  HOUSING CORPORATION SHALL BE SUBMITTED TO THE
 TREASURER AND KEPT IN THE BOOKS AND RECORDS OF SUCH COOPERATIVE  HOUSING
 CORPORATION FOR A PERIOD OF AT LEAST SEVEN YEARS. SUCH RECEIPTS SHALL BE
 MADE  AVAILABLE  FOR  INSPECTION BY A MEMBER OR RESIDENT ON THE PREMISES
 WITHIN THREE BUSINESS DAYS AFTER A REQUEST TO INSPECT SUCH  RECEIPTS  IS
 MADE BY THE MEMBER OR RESIDENT.
   §  154.  AVAILABILITY  OF OFFICIAL NOTICES AND REPORTS. ANY INSPECTION
 REPORT OR NOTICE OF VIOLATION OF ANY LAW, CODE, ORDINANCE,  RULE,  REGU-
 LATION  OR  ORDER  RECEIVED  BY A COOPERATIVE HOUSING CORPORATION BY ANY
 FEDERAL, STATE, COUNTY, MUNICIPAL BODY OR AGENCY SHALL BE MADE AVAILABLE
 TO ALL MEMBERS AND RESIDENTS WITHIN TWO WEEKS OF  RECEIPT  THEREOF.  ANY
 WRITTEN APPEAL, RESPONSE OR REPLY MADE BY THE COOPERATIVE HOUSING CORPO-
 RATION TO ANY SUCH REPORT OR NOTICE OF VIOLATION SHALL BE MADE AVAILABLE
 TO  ALL  MEMBERS  AND RESIDENTS WITHIN ONE WEEK OF WHEN SUCH RESPONSE IS
 MADE.
   § 2. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.

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Senate Bill S4595

Sponsored By

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

co-Sponsors

2021-S4595 (ACTIVE) - Details

2021-S4595 (ACTIVE) - Summary

2021-S4595 (ACTIVE) - Sponsor Memo

2021-S4595 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S4595

Share this bill

Sponsored By

Shelley B. Mayer

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

co-Sponsors

Jeremy A. Cooney

2021-S4595 (ACTIVE) - Details

2021-S4595 (ACTIVE) - Summary

2021-S4595 (ACTIVE) - Sponsor Memo

2021-S4595 (ACTIVE) - Bill Text download pdf

Comments