Governance

July 19, 2016 Published by Toronto and Area Chapter - By JJ Hiew

The Proxy of the Future

From the Summer 2016 issue of the CCI Toronto Condovoice Magazine.

"We're not going to make quorum."

These are words that no condo director ever wants to hear.

Yet this is what we heard at our monthly board meeting and it was three weeks before our AGM. You could see the dread start to form in the eyes of all of the board members. Our AGM numbers had been steadily dropping and last year we only met quorum by the skin of our teeth.

This year, one or both of the following were going to happen:

1) We would hold the meeting, find out we missed quorum, have to adjourn, and reschedule it for a month down the line.

2) We (the directors) would be spending our evenings and weekends canvassing owners to collect as many proxies as possible.

For a fiscally conservative board comprised of introverted volunteer directors, none of those options sat well.

Rescheduling a meeting is expensive. It costs our condo a few thousand dollars to hold a meeting - among other expenses, there is the notice package mail out, fees for the minute taker and auditor, and event space rental because we do not have the facilities to host a meeting on site. There is also all the time and work that is wasted for the board, management and owners who show up in-person ready to meet.

With much chagrin, the discussion at our board meeting inevitably turns to canvassing: who is going to knock on doors on which floors on which days, and who is going to sit in the lobby between what times to try to salvage the meeting as originally scheduled.

Ugh.

When I get home from work, I prefer to spend my spare time in sweatpants binge watching Netflix.

With that, a thought came to mind, "A proxy is just a form, why don't we just collect it online? Why can't we have a secure web form that our owners can use?" Within a week, I set up an electronic form that captured the elements of an owner's proxy. This electronic proxy was to act as a complement to the paper proxy that was included with the AGM package. Instead of canvassing door-to-door, we distributed the electronic proxy to our owners by email.

Are Electronic Proxies Even Legal?

That is the first question I get asked when I talk about electronic proxies.

"Yes, if it fulfils the requirements in the Condo Act for the proxy to be valid." says Patrick Greco, Partner at Miller Thomson LLP's Condominium Law Group. "First, that it be in writing, and second that it be under the hand of the appointer."

Doesn't That Mean it Has to be Hand-Signed On Paper?

Greco has considered the issue and finds, "In common usage, a document that is 'in writing' is one whose content has been reduced to words on a page regardless of whether they are handwritten or printed. According to Ontario's Electronic Commerce Act, an electronic document can be considered to be 'in writing' so long as the involved parties can view, download and print copies of it. With an electronic proxy, as long as both the owner and corporation have the signed copies, then the requirement of 'in writing' is satisfied."

What About the Under the Hand of the Appointer Requirement?

"'Under the hand', in the traditional legal sense, is defined as manually affixing one's signature to a document. If interpreted literally, a document must be hand-signed with a writing instrument by the assigner. Fortunately, the Electronic Commerce Act Section 11(1) allows for electronic signatures to satisfy the legal requirements for executing documents. An electronic signature doesn't have to be an actual signature. It could be tracing your signature on an electronic device using a mouse or finger, or clicking a button saying 'I, the above named sign this document electronically'," says Greco.

Why Do Meetings Fail to Meet Quorum?

Meetings fail to meet quorum for a number of issues. A prevalent issue that every condo has to deal with is owner apathy. To owners, attendance at meetings is regarded as optional. Several are hesitant to give up their free time and view the meeting as an inconvenience.

The paper proxy form is a means for owners to cast their vote without attending the meeting - just fill one out, sign it and send it. This allows them to miss the meeting guilt-free; in theory anyway.

Traditional paper proxies are troublesome - sending them in means they need to be personally handed in, mailed in, scanned and emailed, or faxed. If a condo does accept scanned (and in some cases, photographed) copies of paper proxies, then the property manager still has to record and acknowledge receipt of the proxy. The usage of electronic proxies could alleviate this effort by providing an elegant and automated system for owners to easily submit their proxies.

As a director, I have had several residents express to me how confusing proxy forms can be. Some owners were concerned that their vote would be declared ineligible due to an incorrectly completed proxy. A property manager I spoke to recently echoed these sentiments, "In the days leading up to an AGM, I stay in the lobby after office hours to canvas for proxies. Owners are often hesitant to fill in the proxy on their own as they are unsure of how to complete the form." An electronic proxy can act as a tool to guide owners through the completion and submission of a proxy, thereby making the process more accessible.

Lyndsey McNally, a Registered Condominium Manager and Team Leader at Malvern Condominium Property Management, also commented, "It's difficult to give guidance to owners on how to properly fill out their proxy as there's a risk of introducing bias in our advice. This could potentially expose us to liability as we don't want to give advice on a legal document."

Can Going Paperless Ease Concerns About Proxy Fraud?

There have been many instances of suspected fraudulent paper proxies used by owners or directors to achieve results for their own agenda. This is of particular concern during highly charged political atmospheres which tend to have heated proxy battles. Aggressive door-to-door canvassing techniques can also intimidate or irritate some residents.

Marc Bhalla; a Mediator at Condo Mediators and also a condo director, weighed in on this issue, "When the legitimacy of proxies are questioned, a lot of ill will can emerge between members of a community. Condominiums may benefit from having an electronic proxy system to avoid much of the conflict that the current paper system creates."

Electronic proxies aren't a new idea as they are commonly used for corporate shareholder meetings. In fact, if you own shares in a publicly traded company, you may have utilized electronic proxies already. The Security Transfers Association of Canada's (STAC) Electronic Proxy Protocol offer guidelines in this respect. The STAC guidelines are quite stringent and contain a set of best practices to lessen or eliminate fraudulent and forged proxies. Similar standards could be applied for use by condos. Security measures can be put in place for electronic proxies to provide a reliable means to identify the owner and verify their intentions.

But What About Bill 106?

As you're probably aware by now, Bill 106 will make a number of changes to the Condominium Act, 1998 the full force of which are yet to be known. The introduction of a standardized form of proxy through the regulations is anticipated.

"The regulation setting out the standardized form has not yet been released, so we cannot really comment until we see it. However, we are optimistic that electronic proxy software could adapt to any new requirements. It's our belief that condos could benefit greatly from electronic proxies," feels Greco.

So How Did We Do At the AGM?

Three days before our last Annual General Meeting was held, my condominium had received enough proxies electronically to guarantee quorum… and then some. This was a two-fold increase in proxies received and a 30% overall increase in total owners represented as compared to our previous year's AGM. Feedback from our owners was positive, with the most common praise being the ease and convenience of our tool.

Sometime after our AGM, I got an email from my property manager, "JJ, this online thing would be a great value to other condos. The one I'm living in just had their AGM a few weeks ago and couldn't make quorum. Many condos go through the same issue."

How Can Electronic Proxies Benefit Condo Corporations?

The condo sector has been slow to adopt the use of electronic tools outside of email newsletters or informational notices. "In some communities, the introduction of electronic proxies could create problems, particularly for those who are naturally mistrusting of technology," warns Bhalla. However, electronic proxies could also act as a complement to traditional paper proxies in communities where not every member is as comfortable using new technologies.

If electronic proxies can be used in the corporate world, then it seems reasonable that electronic proxies could be used to fulfill our obligation as a shareholder within a condo corporation. Bhalla goes on to comment, "Especially with the increased communication responsibilities of condominiums expected with the implementation of Bill 106, technology may need to be embraced for what is envisioned - to work efficiently and cost effectively. Electronic proxies appear to be a natural evolution in that respect."

Providing an online solution can increase overall representation, which is particularly beneficial in buildings that have had difficulty with owner engagement. Increased turnout could also mean that bylaws become easier to pass, as many times proposed by-law revisions fail because a majority of owners do not cast a vote.

Electronic proxies can also offer owners a simple, accessible and convenient way to complete their obligations with a few taps on a keyboard or touch screen.

McNally agrees, "A simple and secure electronic proxy form can only benefit the condo industry."