Relates to the reform of charitable corporations and trust governance; repealer

Title of bill

An act to amend the not-for-profit corporation law and the estates, powers and trusts law, in relation to reformation of charitable corporations and trust governance; and to repeal certain provisions of the not-for-profit corporation law and the estates, powers and trusts law relating thereto

Purpose or general idea of bill

To improve and make clarifying amendments to the Nonprofit Revitalization Act of 2013.

Summary of specific provisions

Section one - of the bill amends the definition of "independent director" to:

*clarify that such definition applies to "key" non-employees of the corporation; *provide a different formula (using a sliding scale) to define "independent"; *provide a definition for the terms "compensation" and "payment".

Section one - also provides exceptions to the definition of "real party transaction" and a more comprehensive definition of "key person".

Section two - amends § 114 (Visitation of supreme court) to make a conforming amendment.

Section three - amends § 309 (Personal jurisdiction) of the NPCL to make conforming amendments relating to the term "key person".

Section four - amends § 712 (Executive committees and other committees) of the NPCL to clarify the power of the board to create committees, and to limit the authority of such committees.

Section five - repeals paragraph (c) of § 712-a (Audit committee) of the NPCL requiring the board or the audit committee to oversee the implementation of conflict of interest and whistleblower policies. (See, §§ 7 and 9 of bill, below.)

Section six - provides that an employee may serve as chair of the board upon 2/3 vote of the entire board.

Section seven - amends § 715 (Related party transactions) of the NPCL to allow an authorized committee to determine whether a related party transaction is fair, reasonable and in the best interest of the corporation, and to provide a statutory defense in any legal action involving a related party transaction.

Sections eight and ten - clarify that the board shall be responsible for overseeing the implementation of the conflict of interest and whistleblower policies.

Sections nine and eleven - amends § 715-a (Conflict of interest) and § 715-b (Whistleblower) of the NPCL to clarify that conflict of interest and whistleblower complaints shall be disclosed to the board or a committee consisting of a majority of independent directors.

Section twelve - amends § 720 to make a conforming amendment.

Sections thirteen to nineteen - make the above amendments to the parallel sections in the EPTL. Section twenty - sets forth the severability clause.

Section twenty-one - provides that the act shall take effect immediately.

Justification

In 2013, the not-for-profit corporation law underwent its first major overhaul since its initial enactment in 1969, resulting in the Nonprofit Revitalization Act of 2013 Since its passage, recommendations have been made to improve the 2013 Act. The provisions of this bill correct certain inconsistencies, and will make the statute operate more smoothly and efficiently.

Prior legislative history

New bill

Fiscal implications

None to taxpayers.

Effective date

180 days after the bill becomes law.