United States: Nonprofit Law Revitalization Comes To New York

On December 18, 2013, New York Governor Andrew Cuomo signed into law the Nonprofit Revitalization Act of 2013 which modernizes the New York nonprofit corporation law. The Act overwhelmingly passed both houses of the New York State Legislature on June 21, 2013, almost six months prior to the bill's signing. The most sweeping change to New York State's nonprofit law in 40 years and about two years in the making, the new Act generally takes effect July 1, 2014.

The Act brings reform to New York nonprofit law by enhancing nonprofit governance and oversight to prevent fraud and improve public trust while reducing unnecessary and outdated burdens on nonprofits. Many nonprofits adopted corporate best practices in conjunction with the revisions to the IRS Form 990 in 2008. With the new Act taking effect on July 1, it's time for New York nonprofits to take another look at their governance documents, policies and procedures as well as their governance structures to comply with the detailed requirements of the Act.

Below are highlights of some of the most significant changes under the Act facing nonprofits in New York:

Chair of the Board. The Act prohibits nonprofits from having an employee serve as Chair of the Board or in a comparable position with the goal of ensuring Board independence but allows until July 2015 for nonprofits to make this transition. Consider whether your organization will need a new Board chair before July 2015 in order to comply with this prohibition.

Conflict of Interest Policy Requirements. The Act requires that all nonprofits adopt a conflict of interest policy that requires directors, officers and key employees to act in the organization's best interests and specifies the minimum requirements for such a policy including standards for related party transactions, disclosure of conflicts and resolution of conflicts by the full Board or a committee of independent directors. The Act further requires that each director submit a statement regarding potential conflicts of interest prior to his or her election to the Board and annually thereafter. Consider whether your organization needs to review its Conflict of Interest Policy for compliance with the Act's standards.

Whistleblower Requirements. The Act requires nonprofits with at least 20 employees and $1 million or more in annual revenues to have a whistleblower policy in place to protect persons who report suspected wrongdoing from retaliation. If your organization meets these thresholds, be sure it has a compliant Whistleblower Policy in place.

Electronic Communications and Meeting and Approval Options. The Act brings nonprofits up-to-date with technology and enables nonprofits to conduct Board and membership votes and take other actions via e-mail without a meeting as well as conduct Board meetings via videoconference or Skype, if the nonprofit's governing documents so allow. Further, the Act allows Boards to delegate the approval of small transactions to committees. Consider whether your organization's charter and bylaws allow it to take advantage of the new electronic communication and meeting options or need to be amended to do so.

Related Party Approval Process. The Act prohibits a nonprofit's Board from entering into a related party transaction unless the transaction is fully disclosed and the Board has determined that the transaction is fair, reasonable and in the nonprofit's best interests. The Act defines a "related party" and sets forth the review and approval process that Boards must undertake before entering into such a transaction, including requiring that consideration be given to alternatives and documentation be made of the Board's basis for choosing the insider transaction. The Act also empowers the Attorney General to challenge a related party transaction and, in certain cases, to impose a penalty on the nonprofit or its directors of twice the improperly obtained benefit in addition to other remedies such as unwinding the interested-party transaction. Consider whether your organization has appropriate related party approval processes in place in light of the new requirements.

Executive Compensation Approval Process. The Act contains a number of procedural requirements for approval of executive compensation packages. For example, the Act restricts compensated employees from being present in Board or committee meetings when their compensation is presented for discussion and vote except to the extent the Board or committee requests that they be present to present information or answer questions. Be sure your organization reviews the new procedural requirements for approval of executive compensation and documents in minutes that compensated employees were not present for the deliberation and vote on their compensation.

Approval of Corporate Changes. The Act simplifies and expedites the process for applying for approval of major corporate changes like merger plans, asset dispositions and changes in corporate purpose. Rather than first obtaining the approval of the Attorney General and then the State Supreme Court, as currently, upon effectiveness of the Act, nonprofits may apply for approval directly from the New York Attorney General to approve major corporate changes. Only if the Attorney General disapproves the application or concludes that court review is necessary will judicial review be required. Be sure your organization reviews the new, simpler approval process before your next major corporate change.

Financial Reporting and Audit Oversight. Although most provisions of the Act apply to nonprofits that are incorporated in New York, two important sections of the Act relating to financial audits and financial reporting to the State apply to all nonprofits that are registered in New York for charitable solicitation purposes. First, the Act requires independent directors of a nonprofit with over $500,000 of annual revenue which is required to register with New York State to conduct charitable solicitations to actively oversee the nonprofit's accounting and financial reporting as well as review its annual audit. In addition to these duties, independent directors at larger nonprofits with more than $1 million in annual revenue that are required to register with New York State to conduct charitable solicitations are now subject to additional, more robust financial oversight requirements. These audit oversight provisions do not go into effect until January 1, 2015 for nonprofits with annual revenues less than $10 million in the most recent fiscal year. Separately, the provisions of the Act which require nonprofits, wherever formed, to make annual financial reports to the Attorney General have been amended to increase the annual gross revenue thresholds for reporting and the type of filing required. All nonprofits soliciting donations in New York should become conversant with the changes to both the Financial Reporting and Audit Oversight provisions in the Act.

The New York Nonprofit Revitalization Act is a welcome modernization of the laws applicable to nonprofits and should bring much needed relief to organizations that have been hampered by outdated regulations and red tape for so many years, making operations easier and less onerous while allowing for improved governance and oversight.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions