In the first major overhaul of New York's Non-Profit Corporation Law since 1970, in June the New York State Legislature passed the Non-Profit Revitalization Act of 2013 (the "Act"). The drafters of this piece of legislation were motivated by a desire to (i) modernize and ease the administrative burdens associated with both setting up and running a nonprofit corporation in New York state, and (ii) strengthen and streamline corporate governance, oversight and accountability. 

The Act has many components and will affect both individuals interested in establishing new nonprofit corporations in New York and individuals who are already running nonprofit corporations or charitable trusts in New York. Some provisions will affect foreign nonprofit corporations that register to conduct charitable solicitations in New York. 

Existing New York nonprofit corporations and charitable trusts will be affected in the following ways:

  1. The Act will require every nonprofit to adopt a conflict of interest policy.
  2. The Act will require nonprofits with 20 or more employees and more than $1 million in annual revenues to adopt a whistleblower policy.
  3. The Act will raise the gross revenue thresholds that trigger both an independent CPA audit and an independent CPA's review of a nonprofit's financial statements.
  4. While significant corporate events (such as exchanges, mergers and changes of purpose) currently require court approval followed by attorney general review, under the Act these events will require only attorney general review.
  5. Depending on the number of directors in the nonprofit, the Act may change the vote required to approve certain real estate transactions from a two-thirds vote to a majority vote.
  6. The Act will expand the disclosure requirement in related-party transactions to include "key employees" in addition to officers and directors. In addition, the Act will require the board to consider alternatives to any related-party transaction.
  7. The Act will prohibit employees from serving as chair of the board of directors (or in any officer position with similar authority, regardless of title). This provision will not take effect until July 1, 2015.
  8. The Act will allow board members to meet board procedures via electronic means such as facsimile or e-mail, and for board members to attend meetings via video conference or Skype.
  9. The Act will prohibit an employee from being present during the discussion and decision-making process concerning his or her own compensation.

If the Act becomes law, most of the provisions will become effective July 1, 2014. As of this publishing, the Act had not been signed into law by Governor Cuomo. The Act will require thorough review by officers and directors of New York nonprofits, and the above highlights only some aspects of the Act. Please contact Day Pitney for assistance in understanding how the Act will affect your New York nonprofit.