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30 THE CHICAGOLAND COOPERATOR —FALL 2019 CHICAGOCOOPERATOR.COM LAW & LEGISLATION Interesting Conflicts How Various State Laws Combat Conflicts of Interest in Association Boards BY MIKE ODENTHAL There is a natural inclination in business their associations going forth. For a primer, a to work with those whom you know and portion of that memo is excerpted below: trust. Relying on relationships that have de- veloped over time is just a commonsense way to ensure that you’re getting a fair deal from a competent vendor who will perform their job with inducing minimal headaches. All of this is well and good. But when an individual board member stands to profit from hiring a preferred vendor in any way – and fails to dis- close the true nature of the transaction – then you’re talking about a potential conflict of in- terest, which is decidedly less kosher. Individual states have assorted rules and regulations – usually within their respective condo acts – designed to prevent self-dealing and ensure that association business stays on the up-and-up for the benefit of every owner or shareholder, rather than specific individu- als. In New York, for example, there is the Business Corporation Law, under which most cooperatives in the state were created. It’s worth taking another look at the law, similar legislation in other states, and conflict of in- terest in general. In response to the BCL changes, Richard Klein and Emil Samman, partners at New York City law firm Romer Debbas LLP, sent out a packet to their board members advising them as to how the law will continue to affect For years, section 713(a) of the BCL has provided that if a director of a board has a substantial financial interest in a contract or transaction between a contractor or vendor and the board, this interest must be disclosed to the board. In such a situation, that director cannot vote on that contract or transaction and must recuse him/herself from any deliberations on the matter. Further, Section 713(b) provides that if the contract or transaction was entered into with- out such a disclosure from the interested board member, the board may void the contract or transaction unless it can be established that the contract was fair and reasonable at the time it was authorized by the board. Now, effective as of January 1, 2018, the new addition to the BCL has imposed two new re- quirements on cooperative and condominium boards of directors/managers when dealing with contracts or transactions that would fall into the category mentioned above. First, Section 727 establishes a requirement that cooperatives and condominiums must give each board member a copy of BCL Section 713 at least once a year. What is interesting is that as the law is currently written, it would seem to apply to condominiums despite the fact that