Proxies in a Nutshell
The term “proxy” is a standard term in the HOA industry used by board members, owners, and managers alike, but there is rarely discussion concerning the legal requirements for proxies and how they should be utilized. The purpose of this article is to focus on these rarely-discussed issues and provide readers with a better understanding of proxies.
What is a Proxy?
A proxy is permission granted by an association member (i.e. owner) to another individual allowing such individual to exercise voting privileges on that member’s behalf. Technically, the “proxy” is the person appointed, not the document appointing the person. In practice however, “proxy” is used to refer both to the person and the document.
There are two types of proxies authorized by Colorado law: 1) general proxies, and 2) directed proxies. General proxies simply appoint an individual to vote on an owner’s behalf and authorize such individual to vote as he/she deems appropriate on all issues. A directed proxy specifies and directs the proxy holder how he/she must vote on each issue.
It is also possible for an owner to issue a proxy that is used for quorum purposes only. In other words, the proxy holder cannot vote on behalf of the assigning owner, but that assigning owner is deemed legally “present” at a meeting and may be counted towards quorum even though he/she is not voting.
Unless the governing documents impose restrictions, anyone with legal capacity may be a proxy holder. There is no requirement that the proxy holder be an owner in the pertinent association or even be of a certain age. A person appointed as a proxy holder may not assign the designation to another individual, unless the proxy expressly grants this authority.
When are Proxies Allowed?
Pursuant to the Colorado Common Interest Ownership Act (CCIOA), proxies are always allowed at membership meetings. In other words, associations must allow owners to use proxies at membership meetings.
This rule, however, changes for board meetings. Pursuant to the Colorado Revised Nonprofit Corp. Law (CRNCA), board members may only issue proxies if such authority is set forth in the bylaws. If the bylaws are silent concerning board member proxies, board members cannot issue proxies for board meetings. Even if the bylaws do allow directors to issue proxies for board meetings, CRNCA limits this authority by only allowing directed proxies to be issued and such issuance must be to another board member. These limitations exist regardless of what the bylaws may provide.
Most governing documents do not provide guidance or requirements with respect to the form and substance of proxies. CRNCA also provides little guidance concerning the format of proxies. One requirement set forth in the CRNCA is that proxies must be signed by either the assigning owner personally or such owner’s attorney-in-fact. Therefore, at a minimum, a proxy must be signed. One exception to the signature requirement is when the proxy is transmitted electronically (such as email). In such case, the proxy is considered “signed” as long as there is evidence that the owner in question authorized such proxy (i.e. a proxy was emailed from the owner’s email address).
According to CRNCA, proxies are revocable by the owner issuing the proxy if such owner actually attends the meeting or signs and delivers a written statement to the association indicating the appointment of proxy is revoked or sends a subsequent appointment form.
A proxy is effective when the association receives it and remains effective for eleven (11) months, unless the proxy specifies a different duration (either longer or shorter). For this reason, proxies must also be dated. Except to the extent that the association has a good faith question regarding the validity of the proxy appointment, and to the extent that the proxy may contain express limitations, the association is required to accept the proxy holder’s vote as that of the owner making the appointment.
For more information on proxies and other issues concerning running effective and lawful meetings, click here.