Cooperator News Q&A: Absence of Quorum
Herrick partner Bruce Cholst was featured in a column in Cooperator News responding to a reader who notes that for the past three years, their co-op has not obtained a quorum at the annual meeting. During the pandemic the board decided to move to virtual meetings, however, at each annual meeting, the co-op did not reach a quorum, and as a result, the board members remained the same. Bruce discusses what, if any, are the ramifications in this column below.
Bruce tells Cooperator News, "Standard co-op bylaws provide that a board's term is not over until such time as 'its successors have been duly qualified' by the [election] inspectors. The existence of a quorum at any given shareholder meeting is a legal prerequisite to there being a valid board election. Since there has been no quorum present at each of the letter writer’s cooperative's last three annual meetings, there has not been a valid board election during that period, and therefore the Inspectors of Election were unable to ‘qualify’ the board’s successors. As such, the current board has been frozen in place and will continue in that regard until a quorum is obtained and a new board is ‘qualified’ as successors by the Inspectors of Election."
"The board should actively campaign to garner proxies at the next annual meeting. It might even provide on the proxy form for an option to vote, not for any candidates, but ‘for quorum purposes only.’ Perhaps the board should consider sponsoring a raffle with a prize, say, of one month’s maintenance, but eligibility to participate would be conditioned upon submission of a legally valid proxy. In my opinion, that would be a legal and highly effective inducement to procurement of a quorum."