Corporate Action.
28 RCNY § 3-14
in effect§ 3-14 Corporate Action.
(a) Certificates of incorporation, by-laws, rules and regulations. Each housing company shall file with HPD, for its approval, a certified and acknowledged copy of its proposed by-laws. Each housing company shall also file with HPD, for its approval, a certified and acknowledged copy of all proposed amendments to its certificate of incorporation or by-laws. The housing company shall forward to HPD for its files two copies of the by-laws or amendments to the certificate of incorporation or by-laws subsequent to HPD approval. Failure to seek HPD approval or rejection by HPD of the by-laws or amendments to the certificate of incorporation or by-laws will render the by-laws or such amendments null and void. Certificates of incorporation, by-laws, rules and regulations established by a housing company shall be in conformity with state laws and HPD rules. Housing company certificates of incorporation, by-laws, rules and regulations to the contrary shall be deemed null and void.
(b) Disposition of housing company property. No personal property, books, financial or other records of a housing company shall be destroyed or disposed of without the written consent of HPD.
(c) Salaries, fees or other compensation to officers or directors. No housing company shall pay any salaries, fees or any other form of compensation to any officer or director for services rendered in his or her capacity as corporate officer.
(d) Responsibilities of Board of Directors.
(1) Members of the Board of Directors of a housing company, whether rental or mutual housing company, bear a high public responsibility, since they have elected to operate under a City-aided program to effectuate public policy by encouraging the building and operating of housing developments for families of moderate income.
(2) Board members have a fiduciary responsibility to the shareholders of the corporation. Each board member must ensure that buildings, grounds and other assets are kept up to high standards so that their value is not impaired and that the annual operating revenue is spent effectively and economically.
(3) Board members must exercise judicious control of the premises entrusted in their care, including community rooms and public spaces.
(4) Members of the Board of Directors have an obligation to provide to tenant / cooperators the most economical operation of the development without endangering the long term interest of the project.
(5) Board members should be aware of and responsive to tenant / cooperator grievances.
(6) Upon HPD's request, the housing company shall submit to HPD a copy of the minutes from the relevant meeting, certified as to correctness by the housing company's secretary.
(7) No board member shall receive any preferential treatment or thing of value as a result of his or her board membership.
(8) Members or officers of the Board of Directors must occupy a dwelling unit at the mutual housing company development represented by such Board of Directors as his or her primary place of residence.
(9) Members and officers of the Board of Directors are obligated to ensure that the actions of the Board of Directors and the operations of the housing company comply with the Private Housing Finance Law and/or applicable rules and directives.
(10) All members of the Board of Directors must complete two hours of training courses for which the content has been approved by HPD within twelve months of being elected; provided, however, that members of the Board of Directors who were elected before the effective date of the rule that added this amendment must complete such training courses within twelve months of such effective date. All members of the Board of Directors must then complete such training courses every three years after their original training courses.
(e) Duties and powers. The Board of Directors has the responsibility for establishing policy covering administration of property, interests, business and transactions of the corporation and may delegate to officers such authority as it deems necessary. Sound organizational policy dictates that individual members of the Board should not interfere with day-to-day management and operation of the project or with its employees or intrude upon management functions. Failure to adhere to this policy reduces the efficiency of the operating staff by creating conflicts in control and in the chain of command. However, the Board as a whole is obligated to ensure that the day-to-day operations of the housing company are handled in the most efficient and expeditious manner and nothing herein should be construed to reduce that responsibility.
(f) Capital assessments by a mutual housing company.
(1) Capital assessments. A mutual housing company may, by vote of its directors followed by a vote of the shareholders, assess all shareholders on an equitable basis in order to undertake a program of major capital improvements or major repairs approved by HPD. A mutual housing company must obtain a majority of votes at a meeting of shareholders for this purpose and obtain HPD's approval for the assessment.
(2) Proceeds of capital assessments. The proceeds of capital assessments shall be deposited in a blocked bank account and all withdrawals from such account shall be subject to the written approval of HPD. Any surplus remaining in the account upon completion of HPD approved repairs or improvements shall be added to the reserve fund.
(3) Approval process. A request for approval of a capital assessment shall be submitted in writing to HPD, and shall specifically indicate the type of capital improvements or repairs required, along with an estimate of probable cost and the timetable for completion of the proposed program. Contracts for completion of the program shall be subject to the appropriate provisions of HPD rules, and shall include a provision that the acceptance of all work is subject to the approval of HPD.
(g) Conflicts of interest prohibited in mutual housing companies. No officer or member of the Board of Directors or their immediate family:
(1) shall be or become interested directly or indirectly in any manner whatsoever in any business dealing with the mutual housing company except for resale of shares of their own apartments.
(2) shall act as attorney, accountant, managing agent, broker or employee for any person, firm or corporation interested directly or indirectly in any manner whatsoever in business dealings with the mutual housing company;
(3) shall accept any valuable gift, whether in the form of service, employment, loan, thing or promise, or any other form from any person, firm or corporation which to his or her knowledge, is interested directly or indirectly, in any manner whatsoever, in business dealings with the mutual housing company, its managing agent or any affiliates thereof.
(4) Any deviation from the above requires prior written approval of HPD.
(h) Annual meetings and elections.
(1) The Board of Directors of a mutual housing company shall hold regular meetings for the conduct of business. In addition, an annual meeting for the election of directors shall be held at a time and place, and in the manner prescribed by the mutual housing company's by-laws.
(2) (i) All elections of directors for a mutual housing company that has not been refinanced under Section 223(f) of the National Housing Act must be supervised by an independent election company. No fewer than forty-five (45) days prior to conducting the election, the mutual housing company must submit to HPD in writing (A) the name of the independent election company and the proposed independent election company agreement, (B) for HPD’s approval, all proposed election documents on the forms provided by HPD, including, but not limited to, candidate selection forms, ballots and notices, and (C) drafts of all other documents related to the election.
(ii) No election may be conducted without the prior written approval of HPD of the submission made pursuant to subparagraph (i) of this paragraph.
(i) Voluntary dissolution.
(1) Subdivisions two and three of section 35 of the Private Housing Finance Law, with respect to City-aided limited-profit housing companies, provides as follows: "A company aided by a loan made after [May 1, 1959] may voluntarily be dissolved, without the consent of [HPD], not less than twenty [(20)] years after the occupancy date upon payment in full of the remaining balance of principal and interest due and unpaid upon the mortgage or mortgages and of any and all expenses incurred in effecting such voluntary dissolution. Upon such dissolution, title to the project may be conveyed in fee to the owner or owners of its capital stock or to any corporation designated by it or them for the purpose, or the company may be reconstituted pursuant to appropriate laws relating to the formation and conduct of corporations, provided, however, that prior to any such dissolution and conveyance or reconstitution, payment shall be made of all current operating expenses, taxes, indebtedness and all accrued interest thereon and the par value of and accrued dividends on the outstanding stock of such company. If after making such payments, and after conveyance of the project, a surplus remains in the treasury of the company, such surplus . . . shall upon dissolution, be paid into the general fund of the [City of New York]. After such dissolution and conveyance, or such reconstitution, the provisions of [Article II of the Private Housing Finance Law] shall become and be inapplicable to any such project and its owner or owners and any tax exemption granted with respect to such project pursuant to [§ 33 of the Private Housing Finance Law] shall cease and terminate."
(2) Notice of Intent for Rental Companies. A rental housing company intending to dissolve and/or reconstitute pursuant to § 35, shall submit to HPD no later than 365 days prior to the anticipated date of dissolution and/or reconstitution, a notice of such intention ("Notice of Intent") which shall contain the following information and supporting documents:
(i) Name and address of the housing development;
(ii) Name and business address of the beneficial and legal owner(s) other than limited partners and stockholders;
(iii) Name and address of proposed transferee, if property is being sold or transferred and the proposed date of any such transfer;
(iv) A current rent roll reflecting rents last ordered by HPD and/or by HUD including surcharges, subsidy and other special charge data;
(v) A list of tenants who are presently receiving rent subsidies which may be discontinued as a result of dissolution and the proposed rents to be charged such subsidy recipients after dissolution;
(vi) A copy of any applicable documents relating to the rental development, including, but not limited to, the urban renewal plan, the plan and project, the deed or lease, the land disposition agreement, any applicable Board of Estimate or City Council resolution and the temporary certificate of occupancy and permanent certificate of occupancy, or any other documents requested by HPD; and
(vii) A list of all State, municipal and/or federal financial assistance or subsidies received by the housing development (such as low income housing tax credits, tax exempt bond financing, interest reduction subsidy under Section 236 of the National Housing Act, as amended, project-based Section 8 under the United States Housing Act of 1937, as amended, housing choice vouchers, rent supplement, J-51 or other tax exemption and/or abatement benefits, and flexible subsidy grants) and the amount thereof. All such documents shall also be given to the Tenants Association as well as to a management office on site (or, if there is no management office on site, to a management office located within the city of New York). At such management office, such documents shall be made available to any tenant of such rental housing company and/or his or her representative upon request. The owner shall notify all tenants by ordinary mail or distribution at or under each apartment door and by posting a copy in a conspicuous place on the lobby floor of each building affected of its intent to dissolve or reconstitute at or about the same time as the delivery of the notice of intent to HPD.
(3) Public information notice for rental companies. At least sixty (60) days prior to the proposed date of dissolution and/or reconstitution, a rental housing company intending to dissolve and/or reconstitute shall serve a Notice of a Public Meeting by distribution under each apartment door; shall post such notice in three (3) conspicuous locations within the lobby and elevator areas of each building; and shall send such notice by certified or registered mail to each of the following:
(i) Commissioner and the Assistant Commissioner of Housing Supervision, and
(ii) The president or chairperson of the Tenants Association. Such notice shall specify the day, date, time and location of a public information meeting which shall be held to inform tenants of the proposed dissolution and/or reconstitution of the housing company. If the public information meeting is outside the community district in which the housing company is located, the owner must provide transportation for tenants. Such public information meeting shall be held not less than 10 nor more than 20 days after service of the Notice upon the parties set forth above.
(4) Public information meeting for Rental Companies. Pursuant to the Notice as specified above, the rental housing company shall conduct at least one public information meeting with the tenants. At such meeting representatives of the rental housing company shall inform the tenants of the rental housing company's intention to dissolve and/or reconstitute; the rental housing company's removal from HPD's jurisdiction and, if applicable, its subsequent registration with the New York State Division of Housing and Community Renewal (DHCR) for the purpose of rent stabilization pursuant to the applicable DHCR rules and regulations; whether rent stabilization will be applicable; prospective changes in ownership and any other relevant information regarding future plans for the rental housing company affecting the tenants. A question and answer period shall be conducted. The Tenants Association may invite local elected officials or other representatives to participate.
(5) Where applicable, the rental housing company shall provide evidence that it has appropriately preregistered all apartments with DHCR, indicating current rents for each apartment and services provided to the tenants as of the date of dissolution and/or reconstitution.
(6) Mutual housing companies - special meeting. A board of directors of a mutual housing company considering dissolution and/or reconstitution pursuant to § 35 must call a special meeting in conformance with the mutual housing company by-law requirements for the purpose of ascertaining shareholder interest in dissolution and/or reconstitution. The secretary of the board of directors must submit to HPD a certified resolution stating that not less than two-thirds (2/3) of the dwelling units in such mutual housing company approved an expenditure of funds in a specified amount not to exceed $100,000 for the purpose of the preparation and distribution of a written feasibility study that compares remaining a mutual housing company with dissolving and reconstituting as a private cooperative corporation organized pursuant to the Business Corporation Law or as an Article XI housing development fund company organized pursuant to Article XI of the Private Housing Finance Law. Such written feasibility study must include the different financing options presented to the housing company and must be completed within one hundred eighty days of the certified resolution and thereafter distributed to each shareholder no later than sixty days after its preparation is completed. Each dwelling unit shall be entitled to one vote regardless of the number of shares allocated to such dwelling unit, the number of shareholders holding such shares, or the provisions regarding voting in such mutual housing company's certificate of incorporation or by-laws. Said resolution shall include language as follows:
"This resolution authorizes the board of directors to take steps necessary to prepare a written feasibility study that shall compare (i) remaining a mutual housing company (ii) dissolving and reconstituting as a private cooperative corporation organized pursuant to the Business Corporation Law, or (iii) dissolving and reconstituting as an Article XI housing development fund company organized pursuant to Article XI of the Private Housing Finance Law. Such written feasibility study will be distributed to each shareholder no later than sixty days after its preparation is completed. This resolution authorizes the expenditure of $_________ for such study, and notifies the shareholders that there are Private Housing Finance Law requirements for dissolution and/or reconstitution. This resolution also advises the shareholders that any additional expenditure of funds for such study will require a separate shareholder approval in accordance with the same voting procedures and cannot exceed $100,000 at any one time, and that the New York State Department of Law requirements must be met prior to actual dissolution and/or reconstitution."
A certified copy of the resolution shall be submitted to HPD within seven (7) business days after such vote. Expenditure of funds authorized above shall require prior written approval of HPD.
The feasibility study prepared in accordance with such resolution shall compare (i) remaining a mutual housing company with (ii) dissolving and reconstituting as a private cooperative corporation organized pursuant to the Business Corporation Law or (iii) dissolving and reconstituting as an Article XI housing development fund company organized pursuant to Article XI of the Private Housing Finance Law. Such study shall include, but not be limited to:
(i) a physical condition survey of the mutual housing company development prepared by a licensed engineer or architect projecting such development's capital needs and the costs thereof for the next ten years from the date of such survey;
(ii) projected increases in real property taxes for the next five years due to the loss of any abatements of and/or exemptions from real property taxation that would result from dissolution and/or reconstitution;
(iii) advisory estimates from State and City taxing authorities of the real estate and real property transfer taxes that would result from dissolution and/or reconstitution;
(iv) a market study prepared by an independent real estate professional containing projected sales prices for dwelling units if such mutual housing company were to dissolve and/or reconstitute; and
(v) financial estimates that compare remaining a mutual housing company, dissolving and reconstituting as a housing development fund company organized pursuant to Article XI of the Private Housing Finance Law in accordance with the provisions of paragraph (15) of this subdivision, and dissolving and reconstituting as a private cooperative corporation organized pursuant to the Business Corporation Law.
(6-a) Special meeting to authorize preparation of an offering plan and filing of Notice of Intent.
(i) Pursuant to the applicable notice period in the mutual housing company's by-laws, a special meeting shall be convened by the board of directors of the mutual housing company no later than ninety days after the written feasibility study has been distributed to each shareholder to authorize the (A) expenditure of $__________ for the preparation and submission to the office of the Attorney General of the State of New York of a private cooperative or condominium offering plan for the housing project and for the distribution of such offering plan and the shareholder vote thereon, and (B) submission to HPD of the mutual housing company's notice of its intention to dissolve and/or reconstitute ("Notice of Intent"). Eligible voters for purposes of a quorum and for a vote on preparation and submission of such plan and such Notice of Intent shall be persons named on the stock certificate. Preparation and submission of such plan and such Notice of Intent requires approval of eighty percent (80%) of the dwelling units in such mutual housing company. Each such dwelling unit shall be entitled to one vote regardless of the number of shares allocated to such dwelling unit, the number of shareholders holding such shares, or the provisions regarding voting in such mutual housing company's certificate of incorporation or by-laws. On or after the effective date of Chapter 749 of the Laws of 2021, as amended by Chapter 167 of the Laws of 2022, any other expenditures in furtherance of dissolution and/or reconstitution that have not already either been authorized pursuant to an agreement entered into by the board of directors or received the express prior approval of the shareholders, before the board of directors is authorized to allocate such funds in furtherance of dissolution and/or reconstitution, require the express prior approval of eighty percent (80%) of the dwelling units in such mutual housing company. For purposes of this subparagraph (i), “express prior approval” shall mean that both the purpose of the expenditure and the exact dollar amount of such expenditure are or have been approved.
(ii) The Notice of Intent shall be submitted to HPD no later than 365 days prior to the anticipated date of dissolution and/or reconstitution. It shall be accompanied by evidence of the appropriate shareholder vote and resolution authorizing the preparation and submission of the offering plan and such Notice of Intent in accordance with subparagraph (i) of this paragraph and shall contain the following information and supporting documents:
(A) Name and address of the housing development;
(B) Name and address of proposed transferee, if property is being sold or transferred and the proposed date of any such transfer;
(C) A current rent roll reflecting carrying charges last ordered by HPD and/or by HUD including surcharges, subsidy and other special charge data;
(D) A list of cooperators who are presently receiving subsidies which may be discontinued as a result of dissolution and the proposed carrying charges to be charged such subsidy recipients after dissolution;
(E) A copy of any applicable documents relating to the mutual development, including, but not limited to, the urban renewal plan, the plan and project, the deed or lease, the land disposition agreement, any applicable Board of Estimate or City Council resolution and the temporary certificate of occupancy and permanent certificate of occupancy, or any other documents requested by HPD. Such documents shall also be given to a management office on site (or, if there is no management office on site, to a management office located within the city of New York). At such management office, such documents shall be made available to any cooperator of such mutual housing company and/or his or her representative upon request; and
(F) A list of all State, municipal and/or federal financial assistance or subsidies received by the housing development (such as low income housing tax credits, tax exempt bond financing, interest reduction subsidy under Section 236 of the National Housing Act, as amended, project-based Section 8 under the United States Housing Act of 1937, as amended, housing choice vouchers, rent supplement, J-51 or other tax exemption and/or abatement benefits, and flexible subsidy grants) and the amount thereof; All such documents shall also be given to a management office on site (or, if there is no management office on site, to a management office located within the city of New York). At such management office, such documents shall be made available to any cooperator of such mutual housing company and/or his or her representative upon request. Such mutual housing company shall notify all cooperators by ordinary mail or distribution at or under each apartment door and by posting a copy in a conspicuous place on the lobby floor of each building affected of its intent to dissolve or reconstitute at or about the same time as the delivery of the Notice of Intent to HPD.
(iii) The offering plan must be submitted to the office of the Attorney General no later than three hundred sixty-five days after the shareholders have authorized the expenditure of funds for its preparation.
(7) Special meeting to authorize dissolution and/or reconstitution of mutual housing companies. Pursuant to the applicable notice period in the mutual housing company's by-laws, a special meeting to authorize dissolution and/or reconstitution shall be convened by the board of directors of the mutual housing company after the acceptance by the office of the Attorney General of the State of New York of the filing of the offering plan pertaining to the proposed transfer from the mutual company to a private cooperative or condominium corporation. Eligible voters for purposes of a quorum and for the vote on dissolution and/or reconstitution shall be persons named on the stock certificate. Dissolution and/or reconstitution of the mutual housing company requires approval of eighty percent (80%) of the dwelling units in such mutual housing company. Each such dwelling unit shall be entitled to one vote regardless of the number of shares allocated to such dwelling unit, the number of shareholders holding such shares, or the provisions regarding voting in such mutual housing company's certificate of incorporation or by-laws.
(7-a) Conduct of special meetings.
(i) Special meetings required pursuant to paragraphs six, six-a, seven and fifteen of this subdivision shall be conducted no more frequently than once every twelve months.
(ii) Special meetings required pursuant to paragraphs six, six-a, seven and fifteen of this subdivision shall be conducted by an independent election company. At least sixty days prior to conducting such special meetings, the mutual housing company must notify HPD in writing of the name of the independent election company, and of the intended special meeting procedures, and HPD must issue its approval in writing of such independent election company and of the intended special meeting procedures before such special meeting can take place.
(iii) If the cost of any special meeting required pursuant to paragraphs six, six-a and seven of this subdivision exceeds $15,000 in housing companies with fewer than five hundred (500) dwelling units or $30,000 in housing companies with at least five hundred (500) dwelling units, the contracts will require HPD's prior written approval.
(iv) With respect to special meetings required pursuant to paragraphs six-a, seven and fifteen, the independent election company must submit proof to HPD that the requirements of this paragraph have been met.
(8) Operating Documents of Mutual Housing Companies. Each mutual housing company shall provide in any voting provisions in its certificate of incorporation and by-laws that in the shareholder votes required pursuant to paragraphs six, six-a, seven and fifteen of this subdivision, each dwelling unit shall be entitled to one vote regardless of the number of shares allocated to such dwelling unit, the number of shareholders holding such shares, or any other provisions regarding voting in such mutual housing company's certificate of incorporation or by-laws.
(9) Waiting list notifications. Both rental and mutual housing companies shall submit an affidavit certifying that each applicant on such housing company's apartment waiting list has been advised in writing of the proposed dissolution and/or reconstitution and that fees have been returned to said applicants prior to dissolution and/or reconstitution. Further, the affidavit shall state that any funds unreturned for lack of proper address or other technicality shall be escrowed and returned upon applicant's request.
(10) Payment of mortgage(s) and other indebtedness by rental and mutual housing companies. On the date set for dissolution and/or reconstitution and mortgage prepayment, the housing company shall submit to HPD payment in a form approved by HPD for all principal, interest, supervisory fees, surcharges, amounts payable pursuant to residual receipt notes and any other amounts which may be owing to the City of New York, including any surplus due to be paid into the general fund of the City pursuant to Private Housing Finance Law Article II, § 35(3).
(i) At least sixty (60) days prior to the date set for dissolution and/or reconstitution and mortgage prepayment, a schedule of all accounts payable, taxes due and any other indebtedness, including the par value and accrued dividends on outstanding stock (or, in the case of a partnership, accrued distributions) shall be submitted to HPD for its review and written approval; said schedule to be prepared and certified to HPD by an independent certified public accountant acceptable to HPD. Such schedule shall contain a listing of all items of indebtedness, the amount thereof, the source of payment thereof and the anticipated date of payment, plus the amount of money anticipated to be paid to the City from the remaining surplus. At the time of dissolution and/or reconstitution, such certified schedule shall be amended to reflect the current status of all accounts, and the exact amount, if any, owed to the City. Housing company funds may not be used for the purpose of prepayment of the mortgage debt.
(ii) Accounts payable may include monies owed on executed contracts for repairs or capital improvements, subject to HPD approval. Any contract for capital improvement or repair work in an amount in excess of $15,000 executed within ninety (90) days prior to submission of a Notice of Intent to dissolve and/or reconstitute other than contracts for projects subject to HUD supervision must have a statement attached to the contract submission, sent to HPD for approval, advising HPD that the housing company is contemplating dissolution and/or reconstitution at the time of said submission of the contract. Failure to submit such contracts may result in exclusion of their cost in calculating surplus.
(iii) No legal and accounting fees or other costs in a rental development associated with dissolution and/or reconstitution shall be charged to the housing company.
(iv) Where applicable, the housing company shall submit evidence of payment of any relevant mortgages.
(11) Issuance of letter of no objection to rental and mutual housing companies. Upon payment by certified check or checks from a New York clearing house bank of all amounts owing to the City and/or other mortgagee and certification of compliance with all applicable rules and provisions of law relating to dissolution and/or reconstitution, HPD shall issue a Letter of No Objection to the housing company's dissolution and/or reconstitution.
(12) Notification to New York City Department of Finance. On the date of dissolution and/or reconstitution, both rental and mutual housing companies shall send written notification to the Department of Finance that the property owned by the housing company is to be restored to a full taxpaying position effective the date of dissolution and/or reconstitution. A copy of such notice shall be sent to the HPD Division of Housing Supervision.
(13) Notification to senior citizen rent increase exemption (SCRIE) program. No later than ten days after the date of dissolution and/or reconstitution, both rental and mutual housing companies shall send written notification to the HPD Division of Housing Supervision's SCRIE unit of said dissolution and/or reconstitution and to all SCRIE recipients advising them of their status after dissolution and/or reconstitution.
(14) Terminology Used by Mutual Housing Company. Whenever a mutual housing company uses the term "dissolution," it shall include reconstitution where such housing company elects to reconstitute upon dissolution of such housing company. Furthermore, where the mutual housing company's board or the sponsor of a cooperative conversion of a mutual housing company represents in its cooperative offering plan or other documents that such mutual housing company is amending and/or restating its certificate of incorporation and/or that the shareholders will be voting on a voluntary reconstitution and conversion from a limited-profit mutual housing company to a private cooperative or to a housing development fund company in accordance with paragraph fifteen of this subdivision, section 35 of the Private Housing Finance Law designates these actions as a dissolution and reconstitution of the former limited-profit housing company cooperative.
(15) Notwithstanding anything to the contrary contained in this subdivision, for the purposes of dissolving and reconstituting a mutual housing company as a housing development fund company (organized pursuant to Article XI of the Private Housing Finance Law) that will enter into a thirty-year regulatory agreement with HPD, the following shall apply:
(i) such mutual housing company must follow the procedures contained in subdivisions two and three of Section 35 of the Private Housing Finance Law;
(ii) such mutual housing company shall (A) call a special meeting in conformance with its by-law requirements to conduct a vote in which not less than two-thirds (2/3) of the dwelling units approve the preparation of a draft proxy statement and the submission to HPD of such mutual housing company's notice of its intention to dissolve and reconstitute as a housing development fund company, and (B) after such draft proxy statement has been prepared, submit the draft proxy statement in support of the plan of dissolution and reconstitution to the office of the Attorney General of the State of New York and, simultaneously with such submission, deliver copies of such draft proxy statement to HPD and to each of such mutual housing company's cooperators by ordinary mail or distribution under each apartment door;
(iii) the cooperators shall have ninety (90) days from the submission date to provide comments to the office of the Attorney General of the State of New York, at the expiration of which such Attorney General shall provide any deficiency comments to the mutual housing company;
(iv) within thirty days of the Attorney General's issuance of an exemption letter, such mutual housing company must distribute the proxy statement and no other materials to each cooperator by ordinary mail or distribution under each apartment door;
(v) between thirty and one hundred-twenty days after the proxy statement is distributed to the cooperators, such mutual housing company shall conduct a special meeting in accordance with the applicable notice period in such mutual housing company's by-laws and in accordance with the requirements of subparagraphs (i), (ii) and (iv) of paragraph (7-a) of this subdivision in which the cooperators shall vote on the proxy statement. Eligible voters for purposes of a quorum and for the vote shall be persons named on the stock certificate. No fewer than two-thirds of the dwelling units in such mutual housing company must approve such proxy statement in order for such dissolution and reconstitution to proceed and every dwelling unit shall be entitled to one vote, regardless of the number of shares allocated to such dwelling unit, the number of shareholders holding such shares, or the provisions regarding voting in such mutual housing company's certificate of incorporation or by-laws;
(vi) the independent election company that conducts the special meeting pursuant to subparagraph (v) herein must certify the results of the shareholder vote to HPD as well as prove that the requirements of such subparagraph (v) for such special meeting have been met. If at least two-thirds of the dwelling units have approved the proxy statement and such voting procedures have been followed, HPD shall issue a letter of authorization to the mutual housing company to proceed with dissolution and reconstitution as a housing development fund company in lieu of a Letter of No Objection otherwise required pursuant to paragraph (11) of this subdivision;
(vii) within seven days of receipt of HPD's letter of authorization or within such reasonable time period as HPD has otherwise provided in writing, the mutual housing company shall send a written notice to each cooperator by ordinary mail or by distribution under each apartment door ("Effective Date Notice"), which provides the following:
(A) the proxy statement has been approved by at least two-thirds of the dwelling units and the requisite voting procedures were followed;
(B) the procedures by which cooperators who wish to dissent can exercise the option of becoming rental tenants of the housing development fund company by providing such mutual housing company with an affidavit of intent to forego participating in the plan of dissolution and reconstitution within thirty days of receipt of the Effective Date Notice, and
(C) the mutual housing company shall submit an effectiveness amendment to the Attorney General, which shall include as exhibits HPD's letter of authorization and the Effective Date Notice, within thirty days of such Effective Date Notice. After the Attorney General's acceptance of the effectiveness amendment, HPD shall request that the City Council approve a real property tax exemption for such reconstituted housing development fund company in accordance with Section 577 of the Private Housing Finance Law on substantially the same terms as the prior real property tax exemption that had been issued pursuant to Section 33 of the Private Housing Finance Law;
(viii) within six months after the City Council has approved such real property tax exemption or within such reasonable time period as HPD has otherwise approved in writing, the mutual housing company shall set the date upon which it shall be reconstituted as a housing development fund company ("Reconstitution Date"). On such Reconstitution Date, the following actions must occur:
(A) the filing with the New York State Department of State of the amended and restated certificate of incorporation for such housing development fund company;
(B) the loan closing for any new financing for such housing development fund company;
(C) execution of the thirty-year regulatory agreement by all parties, and
(D) payment of any and all costs associated with carrying out the plan to reconstitute as a housing development fund company; and
(ix) within thirty days after the Reconstitution Date or within such reasonable time period as HPD has otherwise approved in writing, the board of such housing development fund company shall:
(A) provide participating shareholders with their propriety leases and such housing development fund company's corporate documents, including, but not limited to, its by-laws; and
(B) provide dissenting shareholders the return on their initial equity investment in the former mutual housing company and market-rate rental leases for their dwelling units.
(x) Notwithstanding anything to the contrary contained in this paragraph, the Reconstitution Date shall be within twelve months from the first day of the proposed first year of operation of the housing development fund company, provided, however, that if HPD, in consultation with the Attorney General, has approved in writing a Reconstitution Date in accordance with subparagraph (viii) of this paragraph that is more than twelve months from the first day of the proposed first year of operation of the housing development fund company, such mutual housing company shall file an amendment to the proxy statement that was circulated to the cooperators in accordance with subparagraph (iv) of this paragraph.
(j) Proxies, absentee ballots, funding and failed votes.
(1) With HPD's approval, a mutual housing company may require a standard form and procedure for the casting of absentee ballots in any matter requiring a shareholder vote.
(2) In any vote conducted pursuant to subdivision (h) of this section, paragraphs six, six-a, seven or fifteen of subdivision (i) of this section, and paragraph three of this subdivision, voting by proxy shall not be permitted. However, HPD may approve, in writing, a standard form absentee ballot for transmission to the independent election company engaged to conduct any votes pursuant to subdivision (h) of this section, paragraphs six, six-a, seven or fifteen of subdivision (i) of this section, and paragraph three of this subdivision. Such standard form of absentee ballot shall be invalidated by the shareholder executing such ballot if such shareholder appears to vote in person in any vote conducted pursuant to subdivision (h) of this section, paragraphs six, six-a, seven or fifteen of subdivision (i) of this section, and paragraph three of this subdivision.
(3) Notwithstanding anything to the contrary contained herein, no funds from the operating budget of a mutual housing company shall be used to pay for any of the expenses associated with the requirements of subdivision (i) of this section, including, but not limited to, legal services, related to the evaluation of, preparation for, or execution of dissolution and/or reconstitution pursuant to section 35 of the Private Housing Finance Law, and shall instead be raised by a special assessment approved by eighty percent (80%) of the dwelling units in such mutual housing company, or, in the case of a feasibility study or reconstitution as a housing development fund company pursuant to paragraph fifteen of subdivision (i), two-thirds (2/3) of such dwelling units. The total dollar amount of the proposed assessment and the dollar amount per dwelling unit that will be imposed to fund any such action if it is approved shall be specified in all votes by shareholders required by subdivision (i) of this section and no mutual housing company shall increase the amount of the approved assessment without conducting a further vote subject to the same approval requirement of eighty percent (80%) or two-thirds (2/3), as applicable.
(4) A vote conducted pursuant to paragraphs six, six-a or seven of subdivision (i) of this section or a vote conducted pursuant to paragraph three of this subdivision may not occur within five years of a vote undertaken pursuant to such subdivisions that fails to pass, provided that a vote conducted pursuant to paragraph fifteen of subdivision (i) of this section and any related assessment vote conducted pursuant to paragraph three of this subdivision may not occur within three years of a vote that fails to obtain the required approval of two-thirds (2/3) of the dwelling units in a mutual housing company.
(Amended City Record 8/14/2019, eff. 9/13/2019; amended City Record 6/20/2023, eff. 7/20/2023)
Source: City of New York, Charter, Administrative Code and Rules (American Legal Publishing XML export, codelibrary.amlegal.com)URL: https://codelibrary.amlegal.com/codes/newyorkcity/latest/NYCrules/0-0-0-54087Fetched: 10/24/2026