New Coop & Condo Conflict Of Interest Disclosure Law

A new law, which imposes an annual conflict of interest reporting obligation on cooperatives and condominiums, signed by Governor Andrew Cuomo goes into effect on January 1, 2018. 

The law requires cooperatives and condominiums to give a copy of the new law to each director and to give to all shareholders an annual conflict of interest report, signed by each director.  The report must list all contracts voted on by the board where one or more of the directors was an “interested” director, and for each contract state:

1. the name of the contract recipient, the contract amount, and the purpose of entering into the contract
2. the record of each meeting including director attendance, voting records for all contracts, and how each director voted on the contract; and
3. the date of each vote on each contract and the effective date of the contract.

Even if the board did not engage in a transaction that requires the above disclosure, it still must prepare and deliver to all shareholders a document, signed by each director, stating “No actions taken by the board were subject to the annual report required pursuant to section 727 of the Business Corporation Law” [or subject to section 519-a of the Not-for-Profit Corporation Law, as applicable].

Board members, shareholders, managing agents and real estate brokers should be aware. The law basically provides that contracts or other transactions between a BCL corporation and a director (or a company in which a director has an interest) are not automatically prohibited just because of that conflict. If all material facts in regard to the director’s interest were disclosed in good faith, and the Board voted to approve such contract or other transaction without counting the vote of the interested director, the contract or other transaction is valid: it is not void or voidable (due to the conflict).

However, the law does not contain any provision for enforcement, nor any penalties for violations of this provision but it is a small step toward coop accountability.

updated Jan 2 2018