Authorizes a new type of professional service corporation to be known as a professional service corporation

1 Co-sponsor

• John A. DeFrancisco

BILL NUMBER:S2987

Title of bill

An act to amend the business corporation law and the education law, in relation to design professional service corporations

Purpose

This bill authorizes a new type of professional service corporation to be known as a design professional service corporation. Under current law, professional service corporations in New York restrict ownership to design professionals licensed pursuant to education law. Specifically, these professions include professional engineering, architecture, landscape architecture and land surveying. The bill will permit design firms the flexibility of offering an ownership interest in the corporation to non-licensees via the design professional service corporation. This legislation also requires that greater than 75% of the directors and officers must be licensed design professionals and the largest single shareholder must be a design professional. The president, chief executive officer and the chair of the board of directors also must be design professionals. The super majority ownership and management requirements are intended to insure that professional considerations predominate the corporate decision-making processes.

Summary of provisions

Sections 1 through 12 amend the business corporation law to permit the formation of "design professional service corporations" by specified design professionals including professional engineers, architects, landscape architects and land surveyors. Shareholders may include employees of the corporation not licensed as design professionals or employee stock ownership plans (ESOP's), provided that greater than 75% of the voting shares of the corporation shall be owned by design professionals and greater than 75% of the directors and officers shall be design professionals. The president, chair of the board, chief executive officer and the single largest shareholder also must be design professionals. In addition, each of the shareholders, officers, directors and owners shall be deemed to be of good moral character as may be established by regulation of the commissioner of education.

Sections 13 through 16 amend the education law to allow the formation of "design professional service corporations" and require them to obtain certificates of authorization to practice design services in New York.

Section 17 is the effective date.

Justification

Under current New York law, a professional design firm desirous of offering key personnel such as human resources managers, computer information specialists and/or geologists an equity share in a design firm are prohibited from doing so. In contrast, virtually every other state in the country would allow such equity shares to these key

personnel. Many states allow unlimited corporate practice of engineering and other design services, while many others impose ownership and management restrictions similar to those proposed in this bill.

New York's competitiveness both nationally and internationally will be enhanced by virtue of the liberalization of its corporate practice regarding engineering and other professional design services. Design professional service corporations will be able to attract and retain key personnel by affording them an opportunity to share an equity position in the Corporation. At the same time, the requirement that ownership and management continue to be controlled by design professionals assures that the public health and safety remains paramount. Finally, design professional service corporations will be subject to the licensing authority of the board of regents, including the powers of suspension and revocation.

Legislative history

2009-10: S.3226A/A.6787A 2007-08: S.930B/A.2060B 2005-06: S.1477A/A.2755A 2003-04: S.530/A.1035 2001-02: S.1799A/A.3160A 1999-00: S.4989/A.2391

Fiscal implications

None.

Effective date

This bill takes effect on the first day of January 2012.