Report in Support of Modernizing New York’s Not-For-Profit Corporation Law

SUMMARY

The Non-Profit Organizations Committee issued a report in support of S.9047/A.9969, a bill to amend New York’s Not-For-Profit Corporation Law (NPCL) in relation to modernizing such law to align with current practices, streamlining procedures and eliminating unnecessary regulatory burdens. The bill would revise provisions 614(a), 708(b), 705(c) and 708(d) of the NPCL to: explicitly allow unanimous consent of members and directors, respectively, to act without a meeting by other electronic means in addition to “electronic mail”; clarify that replacement directors can be elected by the board to fill the unexpired segment of their predecessor’s term, rather than only through the next annual members or directors meeting at which election of directors is in the regular order of business; and clarify that conflicted directors who leave a meeting do not disturb quorum for the purposes of the conflict vote.

BILL INFORMATION

A.9969 (AM Paulin) / S.9047 (Sen. Comrie) – amends the not-for-profit corporation law, in relation to modernizing such law to align with current practices, streamlining procedures, and eliminating unnecessary regulatory burdens (NYS 2022)

OUTCOME

Signed by the Governor, Chp. 614 – November 21, 2022

REPORT

REPORT ON LEGISLATION BY THE NON-PROFIT ORGANIZATIONS COMMITTEE

A.9969 (M. of A. Paulin)
S.9047 (Sen. Comrie)

AN ACT to amend the not-for-profit corporation law, in relation to modernizing such law to align with current practices, streamlining procedures, and eliminating unnecessary regulatory burdens.

THIS LEGISLATION IS APPROVED

The Non-Profit Organizations Committee (“NPOC”) of the New York City Bar Association hereby expresses support for New York State Senate Bill S.9047 (and the corresponding Assembly Bill A.9969), which includes the revision of provisions 614(a), 708(b), 705(c), and 708(d) of the Not-for-Profit Corporation Law (NPCL) (detailed below). Such changes will modernize provisions of law relating to members, directors, and officers to align with current practices, streamline procedures, and eliminate unnecessary regulatory burdens. The Senate Bill has been introduced by Senator Leroy Comrie and the Assembly Bill, which was introduced by Assemblywoman Amy Paulin, has already passed in the Assembly and has been advanced to the Senate. The Bills have been promoted and supported by members of a working group from the Government Relations Council (GRC) of Nonprofit New York in collaboration with the NPOC.

A description of the proposed changes to the NPCL follows:

• Sections 614(a) and 708(b) would be amended to explicitly allow unanimous consent of members and directors, respectively, to act without a meeting by other electronic means in addition to “electronic mail.” Such change will permit action by means of voting through digital portals, an increasingly common practice through the pandemic; text; and other electronic mechanisms as technology evolves.
• Section 705(c) would be amended to clarify that replacement directors can be elected by the board to fill the unexpired segment of their predecessor’s term, rather than only through the next annual members or directors meeting at which election of directors is in the regular order of business. This is a common point of concern for organizations with classified boards.
• Section 708(d) would be amended to clarify that conflicted directors who leave a meeting do not disturb quorum for the purposes of the conflict vote. While Section 708(d) was revised as part of the Not-for-Profit Revitalization Act in 2014 to convey this intention, the revision introduced another ambiguity which the current language corrects.

The NPOC is a diverse committee of the New York City Bar Association with approximately 50 members. Some NPOC members are law firm attorneys representing nonprofits, some are in house counsel for charitable organizations, and a few are academics. The Committee’s members represent multi-million-dollar institutions, as well as small charities, operating across the nonprofit sector. Some of these institutions have been serving New York for more than a century; others are in their infancy, taking their first steps to launch their charitable missions.

For the reasons described herein, we express our support for the passing of this legislation.

Non-Profit Organizations Committee
Jacqueline D. Ewenstein, Co-Chair
Amarah Sedreddine, Co-Chair

Subcommittee on State Legislative Affairs
William Bell
Tracy Boak
Patricia A. Jendraszek
Ahmed Kushaly
Patty Lipshutz
Robert Pigott
Amarah Sedreddine

May 2022