Recently, I had a conversation with the president of an association about an upcoming Board meeting that was expected to be contentious. The president casually mentioned that one director would be traveling internationally for work and would not be able to attend the meeting—”but it’s OK, we have her proxy.”
Cue the sound of tires screeching to a halt.
When I told the president that proxies cannot be used in Board meetings, I could almost see her brow furrowing through the phone. “Why not?” she asked. I realized it was time for a refresher course on proxies!
Proxies for Board Meetings
We can dispense with this issue quickly and definitively. Virtually every single family, townhome and condominium association is governed by Minnesota Statutes Chapter 317A, the Minnesota Nonprofit Corporations Act (“Nonprofit Act”). Section 317A.237 of the Nonprofit Act eliminates any doubt about use of proxies for Board meetings: “The board shall take action by the affirmative vote of a majority of directors with voting rights present and entitled to vote at a duly held meeting, unless this chapter or the articles or bylaws require the affirmative vote of a larger proportion or number. Proxy voting is not permitted.” (Emphasis added.) This provision would take precedence over any conflicting provision in an association’s governing documents.
Proxies for Association Meetings
Both the Nonprofit Act and the Minnesota Common Interest Ownership Act (Minnesota Statutes Chapter 515B, “MCIOA”) allow use of proxies for membership meetings if the articles of incorporation or bylaws specifically permit it. Each statute imposes certain restrictions on proxy use:
- For those communities governed by MCIOA, the Board may specify the form of proxy and proxy rules, consistent with law. (MCIOA, Section 515B.3-110(b).)
- For communities governed by the Nonprofit Act, regardless of whether they are also governed by MCIOA,
- Proxies must be delivered before the meeting is called to order—even if it’s just five minutes beforehand.
- Proxies submitted in “hard copy” (via US mail) must be signed by the member.
- Proxies may be granted via telephone or electronic mail as well as the standard written form.
- A proxy is valid for 11 months from the date on which it was signed unless a different period is specifically provided in the proxy form.
- In no event is a proxy valid for more than three years after execution.
- Proxies are revocable in one of three ways:
- The person giving the proxy (the “grantor”) attends the meeting for which the proxy was granted.
- The grantor notifies the officer who will be tabulating the votes (usually the secretary) or that officer’s agent that the grantor is revoking the proxy.
- The grantor submits a new proxy executed after the first one was granted. This is why it is important to make sure proxies are dated.
- The association is entitled to accept the proxy holder’s vote or other action unless the grantor specifically limits the proxy holder’s authority on the proxy form.
- The vote of the proxy holder is final and binding, and not subject to challenge, even if the proxy holder voted in a manner contrary to the wishes of the grantor. (That fight is between the grantor and the proxy holder.) From a practical perspective, most people give their proxy to a person of like mind, so this issue doesn’t come up often.
Should the proxy form have a default proxy holder?
Yes. Most associations’ proxy forms say something like, “I, homeowner, grant my proxy to the Secretary of the Association or to [insert name here].” If no name is inserted, the proxy is granted to the officer stated.
Tips and traps for the unwary proxy drafter
- Name a specific officer as the default proxy holder. If the proxy names “the Board” as the default, then the Board must vote as to how such proxies will be voted and who will cast the votes on behalf of the Board. By naming an officer, that additional Board vote is eliminated.
- Identify the officer by title only, not by name. If the proxy reads, “I, homeowner, grant my proxy to Secretary Jason Smith” as the default grantee and Jason is ill, those proxies cannot be used, since they grant voting rights specifically to Jason Smith. If, however, the proxy reads, “I, homeowner, grant my proxy to the Secretary of the Association,” then, if Jason is ill, the Board can appoint an interim Secretary to cast the ballots on behalf of those proxy grantors.
- Typically, the default officer named is the secretary or president. However, if the person holding that office is seeking re-election to the Board, a different officer should be named to avoid any appearance of bias or election tampering.
If quorum is not achieved for a meeting, can the proxy be used for the reconvened meeting?
It depends on the language of the proxy form. Most proxies include language such as, “I, homeowner, appoint the Secretary of the Association as my proxy at the meeting of the Association to be held on January 21, 2022, and at any and all adjournments thereof for the transaction of any and all business that may come before said meeting.” That language entitles the proxy to be used at the reconvened meeting (unless revoked by the grantor). Absent such language, however, the proxy may be limited to the specifically-identified meeting only. When in doubt, consult with the association’s legal counsel.
Is it permissible to use directed proxies? Is it advisable?
A directed proxy is a proxy which authorizes the proxy holder to vote a specific way on specific issue(s). If issues other than those addressed in the directed proxy arise, the proxy holder cannot cast a vote on behalf of the proxy grantor on those issues. The form of proxy typically used for association meetings is a non-directed proxy, which allows the proxy holder to vote on whatever issues are before the membership.
Neither MCIOA nor the Nonprofit Act addresses the use of directed proxies. During the last couple years, when it was not possible to gather in person for meetings, many associations utilized directed proxies as a practical solution to conduct annual meetings and election of directors while adhering to social distancing requirements. However, because voting by mailed ballot (where no meeting is held) cannot be combined with voting at a meeting except under very specific and limited circumstances, I urge caution when using directed proxies, since they can blur the line between a mailed ballot and a traditional (non-directed) proxy. Absent extenuating circumstances, I discourage use of directed proxies.
Who can owners give their proxies to?
Unless an association’s governing documents provide otherwise, a proxy may be granted to anyone, not just another owner. However, many associations’ Bylaws do require that a proxy may be granted only to another owner. Check the association’s governing documents to verify whether there are any restrictions on who may hold a proxy.
If an owner has granted an unrestricted power of attorney to someone (it is not, for example, limited to banking transactions or a specific real estate transaction), does the owner also need to grant a proxy to the holder of the power of attorney (known as the “attorney-in-fact”)?
No. If the power of attorney is not restricted to specific actions, then the attorney-in-fact “steps into the shoes” of the grantor and can act as if he or she was the grantor. Therefore, no proxy is needed.
Final Thoughts
Proxies can be useful tools to better ensure the quorum threshold for association membership meetings is met and to ensure that an owner can still participate in the voting process, even if he or she cannot attend the meeting in person. It is important, however, that proxies are used properly and in accordance with the association’s governing documents to ensure every member is given a fair and equitable opportunity to vote.
If you have questions regarding the use of proxies, or any other questions or issues related to community association, please feel free to contact Nancy Polomis at npolomis@hjlawfirm.com or 952-746-2105.