“By way of background information, in a cooperative form of ownership, legal title to the real and personal property of the development is vested in the cooperative entity, which in New Jersey is traditionally established as a profit, rather than for non-profit corporation. Individuals purchase shares of stock in the cooperative corporation, which carry with it as an incident thereto the right to occupy the dwelling unit, pursuant to the document called a “proprietary lease.”
“Accordingly, the shareholders have a legal interest in the corporation, as an entity and a beneficial interest in the project itself. The corporation, which is managed by a duly elected board of trustees, or directors, manages the project for the benefit of its shareholders.
“As previously indicated, the duties and powers of the board of trustees, is set forth in the association’s governing documents, which include the certificate or articles of incorporation, the association’s bylaws and relevant provisions of the New Jersey Business Corporation Act. The courts in the state of New Jersey have generally upheld decisions of the board, which have been challenged by shareholders, as long as the board has acted and operated within the authority granted by its governing documents. The decisions or rules and regulations promulgated by the board, are generally reviewed by the courts, in accordance with the business judgment rule.
“Accordingly, since the affairs and business of the corporation is the responsibility of the board of trustees, the selection of a management company to carry out its various functions would normally be relegated to the sole discretion of the board. Shareholders, generally have little rights when it comes to the selection process, pertaining to the engagement of a vendor, whether it be a management company or any other service provider engaged by the cooperative corporation.