As this firm has previously advised, as of September 2017, New York Business Corporation Law (BCL) Section 727 requires condominiums and cooperatives incorporated pursuant to the BCL (and the Not-for-Profit Corporation Law) to issue an annual report to all of its owners/shareholders. The report, signed by each board member/director, must disclose whether any contracts were made, entered into, or otherwise voted on by the board where one or more of the directors was an interested member/director. Most New York City condominiums were not impacted because the vast majority are not incorporated pursuant to the BCL or the Not-for-Profit Corporation Law, but rather the New York Real Property Law.
However, on April 18, 2018, New York Governor Andrew Cuomo signed a correction bill making BCL Section 727 applicable to condominiums created pursuant to the New York Real Property Law. As a result, BCL Section 727 is now applicable to essentially all New York City condominiums.
BCL 727 sets forth specific information that must be disclosed in the annual report, including a list of all contracts, the amount and purpose of the contracts, meeting attendance, and how each member/director voted. And, even if there were no transactions qualifying as interested director transactions for disclosure, boards must still issue the report and state that no actions taken by the board were subject to the annual reporting requirement. Boards should consult with counsel in drafting the annual report.
Interested director transactions are those in which a board enters into a contract with a board member/director, an entity in which a board member/director is a director, or an entity in which one or more board members/directors has a substantial financial interest. (See BCL Section 713)
It is important to note that BCL Section 727 also requires that each board member/director must, at least once per year, receive a copy of BCL 713.