HOLDING SUCCESSFUL ANNUAL MEETINGS

by Charlene C. Marquez, A.M.S., President CJM Association
and Reviewed by James Devereaux, Esq.

It's that time of year again - ANNUAL MEETING TIME!

What can you do to make the process as simple as possible? START EARLY! The Corporations Code and many Bylaws require that notices be mailed 10-90 days prior to the meeting. Bylaws may vary on this requirement (some say 30 - 60 days), so check your Bylaw provisions to be sure you are in compliance. If you've had problems getting a quorum at your Annual Meeting (and who hasn't?), we suggest you get that notice and proxy out early - 60 to 90 days before the meeting. That allows you to send out additional reminders and proxies at least two or three times again before the meeting, increasing the odds of acquiring enough proxies to accomplish a quorum the first time. The notice of the Annual Meeting should always include a map and/or directions, unless the meeting is to be held within the community at a clubhouse or similar area.

If you are lucky enough to have homeowners who have volunteered to serve on a nominating committee, they should get active about six months prior to the meeting. If you haven't found those volunteers, Board Members may be appointed to serve on the committee. Many Bylaws require that a member of the Board serve on the committee. Whether or not you have a nominating committee, solicit interest in serving on the Board and on committees in your newsletter before and at the same time you mail out notices and proxies. Any homeowner may request that his/her name be placed on the proxy and ballot.

Before you send out the notice and proxy, you must, of course, have a date and location set. If you don't have a clubhouse in your community, you will need to find an adequate location near the community. Elementary schools often allow use of their multipurpose rooms for minimal or no fees, but they need to be reserved well in advance. While hotels have nice meeting rooms, they are often very expensive.

The Corporations code requires that any item you know will be up for a vote at the Annual Meeting must be included on the proxy. You may, but are not required to, list those homeowners who will be running for the Board of Directors and allow homeowners to express their wishes on the proxy. This may work well if your nominating committee has completed its work early and if you have allowed homeowners adequate time to express their interest in running for the Board, however, naming candidates on the proxy often eliminates the possibility of anyone other than those listed on the proxy from being elected. A homeowner who arrives at the meeting and expresses his or her interest in running probably won't be elected unless he or she enters the meeting with a handful of proxies assigned to him or her.

One item that should be placed on your proxy and ballot each year is a Resolution Regarding Excess Operating Funds, which allows any excess operating funds to be rolled to the following year to offset increases in the assessments for the following year or to correct reserve deficiencies. The IRS regulations have been interpreted to require that this resolution be adopted annually by the Association members, not just by the Board and allows the Association the option of filing as a Corporation (Form 1120) or as a Homeowners' Association (Form 1120H). It is good policy to adopt this Resolution annually.

If other decisions are to be made at the meeting, such as amendments to the governing documents or a vote regarding earthquake insurance, be sure those items are fully explained in your notice and proxy so that homeowners may mark their proxies intelligently.

Keep in mind that a proxy is NOT a document on which a homeowner casts a vote, but is a document on which a homeowner "may authorize another person or persons to act by proxy" (Corporations Code Section 7613). A proxy must "afford an opportunity...to specify a choice between approval and disapproval of each matter of group related matters intended...to be acted upon at the meeting for which the proxy is solicited...and shall provide...that where the [homeowner] specifies a choice...the vote shall be cast in accordance therewith" (corporations Code Section 7514).

Whenever an item is placed on a proxy or ballot for a vote, homeowners should have the option of voting for, against, or abstaining on each issue. Be sure all of those options are available on the proxy and ballot. In addition, if names of candidates are listed on these documents, homeowners should be given the option of withholding a vote for all candidates or, in the case of a proxy, adding names of candidate they intend to nominate from the floor.

Many Associations offer incentives for attendance at Annual Meetings, such as refreshments, drawings for prizes, pot luck dinners, etc. While incentives often work, be sure that anything you offer is fair and legal. If you are unsure if an incentive is legal, discuss it with the Association's attorney before it is offered.

When proxies start arriving in the mail, you should be ready for them. Print a sign-up sheet and keep track of homeowners who have returned their proxies on that sheet. If this log is kept up on a daily basis and proxies are alphabetized as they come in, you will save yourself a lot of organizational work on Annual Meeting day. This sheet may also be used to note how each homeowner wishes their proxy holder to vote regarding each issue when proxies are assigned to the Board or an officer. Proxies may be turned in at the meetings as well, so be ready for an influx of proxies at the sign-in table. A sticky note can be placed on any proxy assigned to anyone other than the Board to facilitate giving the ballot to the appropriate person when they enter to sign in.

A week before the big day, all forms that will be needed for the Annual Meeting should be printed and collated. This includes the agenda, ballot for the election of the Board of Directors and any other ballots for other issues to be decided. If you know of homeowners who are interested in running for the Board, but did not present their names for election prior to mailing of the proxies, their names may be placed on the ballot. All candidates must be nominated when the floor is opened for nominations at the meeting, whether they expressed their interest as individuals or were named by the nominating committee.

I have found that printing the agenda and ballots in different colors helps you to identify the correct ballot when you are discussing it at the meeting. When a specific issue is discussed, tell your homeowners to take out the "blue" ballot and then discuss the issue with them. This avoids a lot of confusion, especially if there are a number of items that will be decided.

On the day of the meeting, you should review a checklist of items to be sure you have everything ready for the meeting. Following is a list for your review:

•Sign-in Sheet •Signed Proxies •Annual Meeting Agendas •Election Ballot •Resolution Regarding Excess Operating Funds Ballot •Declarant Ballots, (If Applicable) •Any Other Ballots •Extra Blank Proxies* •Tally Sheet for Each Ballot •Extra Pens •Committee Sign-Up Sheet •Organizational Agenda Packets (If Applicable)

(* You may need the extra blank proxies if you do not have a quorum.)

If you do not have a quorum at the meeting, homeowners in attendance should be asked to complete a proxy before they leave to ensure a quorum at the Reconvened Annual Meeting. If you must reconvene a meeting because of a lack of quorum, be sure to follow the requirements in your Bylaws regarding when the reconvened meeting may be held and what notice, if any, must be given.

The Management team (or Board of Directors if you have a self-managed Association) should arrive at the meeting site at least 45 minutes to an hour before the meeting is scheduled to begin. This will allow you adequate time to get set up. Most schools will set up chairs and tables for you in advance, but some do not. You will most likely have to do some rearranging in any case.

Set up your sign-in sheets, completed proxies, agendas and ballots near the entry to the facility so you are able to catch homeowners as they enter. Having the agenda and ballots collated in order of the agenda will help you get people through this line quickly. If refreshments are being served, direct homeowners to the refreshments after they sign in. This will make waiting for a quorum easier on everyone.

Some Board Presidents like to run the meeting themselves, while other prefer that management run the meeting. Regardless of who runs the meeting, the President should call the meeting to order, open the floor for nominations, call for a motion, second and vote to close nominations, appoint inspectors of election (if they are being used) and close the meeting.

If you have an active Board (or are self-managed) and the Board wishes to run the meeting themselves, each Board member should have an assigned part in the meeting. With a five-member Board, the President will run the meeting; the Vice President may be asked to discuss the Association's activities and accomplishments over the previous year; the Secretary should read the minutes of the last annual meeting, which will need to be adopted by the members; the Treasurer should give a brief financial report and answer any questions regarding the financial position of the Association; and the Director at Large may want to discuss committee activities and introduce committee members, thanking them for their contributions to the community. If there are fewer members on your Board, some of these responsibilities may be delegated to committee members. With larger Boards, it may be difficult for each member to participate in the meeting. Often, management will handle those tasks if the Board prefers.

Once a quorum is established at the meeting, the President calls the meeting to order and the business is handled. The President should not deviate from the printed agenda. When members bring up items not on the agenda, they should be tabled until an open discussion following the scheduled business (usually while ballots are being tallied).

The agenda usually follows a format similar to that shown below:

1. CALL TO ORDER (by the President)

2. INTRODUCTION OF BOARD OF DIRECTORS AND MANAGING AGENT

3. PROOF OF NOTICE AND QUORUM (Give date notice was mailed and proof that a quorum is present at the meeting)

4. APPROVAL OF THE MINUTES OF THE PREVIOUS ANNUAL MEETING (read by the Secretary)

5. ASSOCIATION ACTIVITIES given by Vice President or other Board Member if the President runs the meeting; by the President if management runs the meeting. The easiest way to compile a list of activities is to review the agendas for the past year - these will usually list all important issues decided by the Board over the past year.

6. FINANCIAL REPORT (Given by the Treasurer - should be brief, since most members are only interested in the bottom line - how are we doing financially??)

7. RESOLUTION REGARDING EXCESS OPERATING FUNDS (The reasons for adopting this resolution should be discussed before a vote is taken. Members should be encouraged to adopt this resolution to allow for maximum flexibility in filing tax returns.)

8. ANY OTHER ISSUES ON THE AGENDA TO BE DECIDED BY VOTE (Each issue should be covered in detail and there should be a separate ballot for each item.)

9. ELECTION OF BOARD OF DIRECTORS (Begins by opening the floor for nominations; names of all homeowners who wish to run for the Board must be placed into nomination at this time, whether or not their names appeared on the proxy or ballot; when all nominations have been made, the nominations should be officially closed, with a motion, second and a vote, to assure that all members have had an opportunity to be nominated; each candidate should then give a brief statement regarding his/her interest in serving on the Board; cumulative voting should be explained - the Corporations Code requires that one homeowner express his/her intention to cumulate votes prior to voting, so this is the time for that statement to be made; then the vote should be taken.)

10. APPOINTMENT OF INSPECTORS OF ELECTION OR BALLOT COUNTERS (If you appoint Inspectors of Election to count the votes, the Corporations Code requires that either one or three be appointed. Whether or not you appoint Inspectors of Election to count votes, you should have a clear and organized process for tabulating votes. Of course, counting of ballots should be done by members who are not running for the Board or related to anyone running for the Board.)

11. COUNTING OF BALLOTS AND ANY NEW BUSINESS TO BE BROUGHT BEFORE THE MEMBERS (If you have a property manager, a member of the management team should accompany the Inspectors of Election or ballot counters to a private area to explain the tally procedures and count the ballots; while ballots are being counted, the floor is opened for new business, member questions, suggestions, etc.; this is also a good time to remind homeowners that there is a sign-up sheet for anyone interested in being appointed to serve on a committee.)

12. ANNOUNCEMENT OF ELECTION RESULTS (the President should announce the election and ballot results. Unless it is really important that the homeowners know how many votes each candidate received, it is probably best not to state the actual number of votes received. If a candidate received substantially fewer votes than others who were nominated, I see no point in announcing this information.)

13. ANNOUNCEMENT OF THE ORGANIZATIONAL BOARD MEETING (I generally like to have a brief organizational Board Meeting directly following the annual meeting to determine the new officers, sign bank signature cards, and handle other information of great importance. If the meeting will be held immediately following the annual meeting, it must be announced so that all members present are aware of the Board Meeting, since all Board Meetings are open meetings. If the Board will schedule this meeting for a later date, there is no need to announce it at the Annual Meeting.)

14. ADJOURNMENT (The adjournment should be made with a motion, second and a vote to assure that everyone has had the opportunity to bring up any business prior to adjournment.)

An Annual Meeting is as much a celebration of the Association and it's accomplishments as it is a time to handle the necessary business of the Association. If an Annual Meeting is well organized and the Board and management work together, it generally will not run more than 1 1/2 hours. When it is over, everyone should feel good about their Association and the people who have been elected to run it.

Charlene C. Marquez, A.M.S.,
is President CJM Association Services
in Pleasanton, California.
510-426-1508