Q&A: Rules for Quorum

Q Is there a law allowing us to conduct a meeting without a quorum reached? We need more than 50 percent of the vote and certain shareholders refuse to attend meetings. We don't have a co-op board and cannot elect one. The old board members, still in place, have moved out of state, and we cannot hold elections. The housing court ruled that we have to get a new board in place by the beginning of the year. What should or can we do legally?

—Quorum-less in New Brunswick

A “Your question is complicated and raises many issues,” says Audrey D. Wisotsky, a partner at the law firm of Pepper Hamilton LLP in Princeton. “Most community associations (condominium and homeowner associations) are nonprofit corporations, subject to the New Jersey Nonprofit Corporation Act, N.J.S.A. 15A:1-1 et seq. (“Nonprofit Act”). Cooperative corporations, on the other hand, generally are business corporations governed by the New Jersey Business Corporation Act, N.J.S.A. 14D:1-1 et seq. (“Corporation Act”). Subject to the provisions of those laws, the election of board members and conduct of the business of the association or cooperative corporation are governed by an association/cooperative corporation’s governing documents.

“The existing board members appear to be failing to fulfill their fiduciary duties. Therefore, at the outset, you and other members/shareholders should notify those board members that you are considering pursuing claims for breach of fiduciary duty. This, at least, may prompt the board members to take necessary action to perform their duties or resign.

“Unfortunately, neither the Nonprofit Act, nor the Corporation Act provides a mechanism for conducting a meeting without a quorum. However, there are other mechanisms you may use to satisfy the quorum requirement, hold an election and obtain a functioning board. Pursuant to both the Nonprofit Act and the Corporation Act, if by resignation or other cause, there are no trustees in office, any member upon proper notice may call a special meeting of the members for the election of trustees. The association/corporation may then be successful in obtaining a quorum at the special meeting if it uses proxy voting. Proxy voting allows a member/shareholder to designate another person to cast his/her vote using a signed form or letter.

A proxy form can be included in the notice of special meeting. Shareholders/members can go door-to-door in an attempt to collect the proxies. If you have a few dedicated volunteers, obtaining the proxies combined with calling the special meeting may be the most effective method of achieving the quorum requirement.

“As a last resort, New Jersey courts of equity may affect corporate decision-making. For example, New Jersey courts have exercised their power in altering a board of directors’ decisions by setting a vote aside and ordering a new one. In more extreme circumstances, New Jersey courts of equity have intervened in corporate affairs in the absence of a properly constituted board. Therefore, if you have no other recourse, you may petition the housing court, if it is the proper forum, to appoint a receiver to conduct the affairs of the association/corporation.”

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Comments

  • Can an action be taken without physical presence of a Quorum according to NJSA 15A: 6-7. C? It says "Unless otherwise provided by the certificate of incorporation or bylaws, any action required or permitted to be taken pursuant to authorization voted at a meeting of the board or any committee thereof may be taken without a meeting if, prior or subsequent to the action, all members of the board or of the committee, as the case may be, consent thereto in writing and the written consents are filed with the minutes of the proceedings of the board or committee. The consents shall have the same effect as a unanimous vote of the board or committee for all purposes, and may be stated as such in any certificate or other document filed with the Secretary of State." If so. Does the time between the signatures matter as long as you eventually get everyone's signatures?