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Common Misunderstanding of the Use of Proxies

By: John H. Gettinger, Esq.

Many of our community association clients misunderstand the use of proxies. Section 609 of the Business Corporation Law of the State of New York ("BCL") permits shareholders entitled to vote at a meeting of the shareholders to authorize another person to act for him or her by proxy. Most community association by-laws also authorize the use of proxies by their shareholders, unit owners or members.

There are two types of proxies - the general and the designated proxy. The general proxy permits the holder of a proxy to vote on all matters that come before the meeting in such manner as he or she may determine. The designated proxy stipulates in the proxy the manner by which the holder of the proxy must vote on the matters stated in the proxy.

A proxy is not an absentee ballot even if it is a designated proxy. The holder of the proxy must actually be present at the meeting and must complete a ballot for the owner he or she is representing. We advise our clients to staple the proxy and ballot together. If the holder of the proxy is not present at the meeting, the proxy cannot be counted toward the vote.

By the way, while some states have adopted enabling statutes which permit absentee ballots, New York has not done so. There is a real question whether community associations can use absentee ballots even if the community association's by-laws permit such use.

There is one other question which our community association clients frequently ask us regarding proxies, namely can directors appear by proxy at a meeting of the Board of Directors? The answer is no as there is no statutory authority for this, nor do community association by-laws permit this. The reason for this is that directors owe a fiduciary duty to act in the best interest of the community association which fiduciary duty cannot be transferred to another person. Directors may, however, act outside of a meeting by written consent (which is authorized by ยง708(b) of the BCL and by most community association by-laws) if the vote of directors is unanimous and is evidenced by a written consent signed by all directors.

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