The recent Condo Authority Tribunal (“CAT”) decision, Kalinitchenko v. York Region Common Elements Condominium Corporation No. 1219, is a reminder to corporations that boards cannot transact any business without having the requisite number of directors to constitute a quorum.
The applicant brought the application requesting access to certain records. At the outset of the hearing, the applicant notified CAT that there was an insufficient number of board members to constitute a quorum, therefore, the corporation could not transact any business. CAT agreed that the corporation neither had the authority to participate in the proceeding nor retain and direct legal representation in the proceeding.
Section 27 of the Condominium Act, 1998 (the “Act”) grants a board the power to manage the affairs of a corporation. Section 32 of the Act provides that a quorum for the transaction of business is a majority of the number of persons of which the board consists in accordance with the Act, irrespective of any vacancy that arises in the board.
CAT adjourned the proceeding to give the corporation an opportunity to respond to the quorum issue and ordered the respondent to provide documentation to confirm its board was constituted in accordance with section 32 of the Act and had the authority to retain and instruct a representative to participate in the hearing.
The respondent uploaded a document that showed that the two existing board members passed a resolution to amend its by-law to reduce the number of board members from 5 to 3.
CAT held that the by-law amendment was not made in accordance with Section 56 of the Act. CAT held that the by-law was not effective as the majority of all unit owners did not vote in favour of the by-law at a duly constituted meeting of the corporation.
CAT noted that, even if the by-law was passed in accordance with the requirements under the Act, there were subsequent resignations and appointments that were invalid, and the board did not have quorum at the time of hearing.
CAT ordered that the hearing proceed without the participation of the corporation.
This decision serves as an important reminder that a board cannot transact any business, whether its responding to a proceeding, entering into a contract or otherwise, without a quorum of the board. It is prudent that a corporation take the proper steps when a board loses quorum, which includes:
- sending an ICU to owners within 5 days of losing quorum;
- sending a notice of meeting to owners within 15 days of losing quorum calling for a meeting to elect directors;
- holding a meeting of owners within 30 days of losing quorum; and
- sending an ICU to owners within 30 days of a change of directors or officers of the corporation and a notice of change to the CAO.