United States: Governor Cuomo Approves Amendments To 2013 New York Non-Profit Revitalization Act To Refine Numerous Provisions, Including Those Relating To Conflicts Of Interest, Related-Party Transactions And Board Committee Composition

Background

On November 28, 2016, Governor Andrew Cuomo signed legislation that makes major needed revisions to the Non-Profit Revitalization Act of 2013 (NPRA) for New York-formed nonprofits.1 These changes address some of the irksome problems created by the NPRA, especially the provisions dealing with related party transactions, conflicts of interest and board committee composition, making nonprofit operations more manageable.

 The newly-approved bill will bring the law into conformity with guidance previously issued by the Attorney General regarding related party transactions. The 2016 changes follow modest "tweaks" to the NPRA enacted in 2015.2 These changes should be applauded by all members of the New York nonprofit community.

Most of the 2016 changes become effective May 27, 2017. As a result of these reforms, New York-formed nonprofits will need to review and revise their by-laws, conflict policies and any required whistleblower policies to reflect the 2015 and 2016 changes.

This is also a good opportunity for New York-formed nonprofits to generally review their governance documents to make sure they conform to other provisions of the Not-for-Profit Corporation Law (N-PCL), including requirements in the NPRA that were not affected by the 2015 or 2016 changes.

The NPRA,3 which became effective July 1, 2014, amended the N-PCL, Estates, Powers and Trusts Law (EPTL) and Executive Law, among other laws. While it made many changes aimed at making these laws more manageable, especially in the area of formation of nonprofit corporations, the NPRA imposed significant and often onerous burdens on nonprofits with respect to certain governance matters, especially related-party transactions and other conflicts, whistleblower procedures and related matters. The 2013 law also created certain unintended complications, as is often the case with new legislation, including matters related to how board committees are formed and function.

The New York nonprofit bar, including the New York State Bar Association, the New York City Bar Association, the New York Law Revision Commission (LRC), the Lawyers Alliance of New York (LANY) and the Nonprofit Coordinating Committee (NPCC), among other groups, generally supported the 2013 changes but pushed for refinement of certain provisions. Certain minor technical corrections and a few refinements were enacted in 2015 and, after extensive coordination with the New York Attorney General's office, major corrections were enacted late in 2016.

The 2013 law and the 2015 and 2016 changes represent the culmination of a process to revise New York's N-PCL, which had not been substantially changed since it was adopted in 1969. This process was started by the State Bar when it proposed a top-to-bottom rewrite of the N-PCL and further promoted by the City Bar in commenting on the State Bar's proposal and suggesting that it might be easier to address specific problematic provisions of the N-PCL instead of rewriting the entire law. The Charities Bureau of the New York Attorney General's office commissioned a blue ribbon panel to study possible reforms to the N-PCL and other nonprofit practices, circulated a "study bill" in 2012 and then proposed the bill which became the NPRA in 2013. Under the leadership of LANY, the LRC and NPCC assumed significant roles, along with the New York State and New York City bar associations, in generally supporting the Attorney General's bill and promoting the 2015 and 2016 modifications.

These 2013-2016 reforms do not obviate all of the problems with the N-PCL, but they eliminate many of the ambiguities and unintended procedural problems.4 The 2015 and 2016 revisions were intended solely to rectify problems arising under the 2013 legislation; there are other provisions of the N-PCL that are also ripe for reform.5

Download - Governor Cuomo Approves Amendments To 2013 New York Non-Profit Revitalization Act To Refine Numerous Provisions, Including Those Relating To Conflicts Of Interest, Related-Party Transactions And Board Committee Composition

Footnotes

 1 A10365-B, available at https://www.nysenate.gov/legislation/bills/2015/A10365/amendment/B . Note that the NPRA provisions do not apply to nonprofits formed outside of New York, even if they are qualified to conduct activity in New York or solicit contributions in New York.

 2 S5868-A, available at https://www.nysenate.gov/legislation/bills/2015/S5868/amendment/A ; S5870, available at https://www.nysenate.gov/legislation/bills/2015/S5870 , and A7641, available at https://www.nysenate.gov/legislation/bills/2015/A7641 . The 2015 changes extended the effective date of a requirement that an employee could not be a chair of the board or hold any other office with similar authority, tweaked the definitions of independent director, related party and key employee (among other terms), and rectified certain problems regarding board member compensation, board quorums and board committees. These changes, where still relevant, are discussed in this Stroock Special Bulletin, to alert nonprofits that did not reflect them in new by-laws that had been previously changed to reflect the adoption of the NPRA.

3 A8072, available at https://www.nysenate.gov/legislation/bills/2013/A8 072.

4 It remains to be seen whether these changes are sufficient to encourage new nonprofits to form in New York, or whether new nonprofits will instead look to Delaware and other states to avoid complications stemming from the New York law that can be avoided by incorporating in other states. That question is something that will continue to be monitored by the New York nonprofit bar. It appears likely that smaller New York nonprofits, which might want to avoid dealing with the inconveniences of out-of-state incorporation – however minor that might be – as well as other nonprofits that rely on New York State or New York City funding, will incorporate in New York state. However, many larger or more sophisticated nonprofits will continue to incorporate in other states with more welcoming statutory and regulatory environments.

5 These include oft-ignored requirements that (a) nonprofit members (or, if there are no members, the directors) receive at the annual meeting a written annual report that includes certain financial information that is no older than six months, notwithstanding the fact that the annual meeting may be held later than six months after year-end (note: distribution of the Form 990 does not technically satisfy this requirement), (b) notification be given to members regarding obtaining directors and officers insurance policies and any claims under such policies, (c) changes to the size of the board of directors must be approved by action of a majority of the entire board if the by-laws state that the size of the board shall be fixed by the board, (d) provisions regarding classification of the board (e.g., having three classes of directors with one-third of the directors elected each year) must appear in the certificate of corporation instead of the by-laws unless the corporation has members who have approved this provision in the by-laws, and (e) newly elected directors must submit a conflicts questionnaire prior to election instead of promptly after election (the Attorney General recommends that the by-laws state that such newly-elected director cannot take office until such questionnaire has been submitted).

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.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.