Question: I recently read about an HDFC cooperative that “went private” and thought that wasn’t possible. If HDFC shareholders want to do the same and go private, what do they need to do?

Answer: The question of whether a housing development fund company (HDFC) that operates as a housing cooperative can go private is subject to various factors. First, an HDFC cooperative is formed under Article XI of the Private Housing Finance Law (the PHFL) and §402 of the Business Corporation Law (the BCL). (In a limited number of cases, there are also membership HDFC cooperatives formed under the PHFL and the Not-for-Profit Corporation Law.) Therefore, both of these laws apply in determining whether the shareholders may “go private.” Every certificate of incorporation for an HDFC cooperative states it was formed “exclusively to develop a housing project for persons of low income” (N.Y. Priv. Hous. Fin. Law §573(3)(a)) and such HDFC cooperative “shall be operated exclusively for the benefit of the persons or families who are entitled to occupancy in such [HDFC cooperative] by reason of ownership of shares in such [HDFC cooperative]” (id. at §573(4)). Furthermore, an HDFC cooperative cannot be formed without the consent of a supervising agency, which in New York City is usually the Department of Housing Preservation and Development (HPD) and is the Division of Housing and Community Renewal (DHCR) elsewhere throughout the State. Finally, any amendment to the certificate of incorporation also requires the consent of such supervising agency. See id. at §573(5).

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