Q My question is about the co-op’s building sponsor. I understand the building is owned by each shareholder and that they vote in a board to run the corporation. How does the sponsor factor into all of this? Is the sponsor part owner apart from the shareholder?
— Confused Shareholder
A “The answer to the question requires a review of your co-op’s governing documents (i.e.—the bylaws, proprietary lease, offering plan and any amendments thereto) and the co-op’s certificate of incorporation,” says Garden City-based attorney Marc H. Schneider with the law firm of Schneider Mitola LLP. “Sponsor voting rights are usually restricted by the New York State department of law (attorney general’s office,) in that, sponsors are not permitted to control (elect and/or designate a majority of the directors) a co-op’s board for more than the sooner of five years from the date of closing of the co-op, or when the sponsor owns less than 50 percent of the unsold shares of the co-op.
“Once the control period has passed, you must turn to the governing documents to determine what rights the sponsor has with respect to voting for directors in an election for the co-op’s board of directors. In that regard, there are typically two types of provisions which govern the sponsor’s rights; to wit: (1) a voting control clause; and (2) a “will not elect” clause.