S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6994

                            I N  S E N A T E

                              March 4, 2010
                               ___________

Introduced  by  Sen. VALESKY -- read twice and ordered printed, and when
  printed to be committed to the Committee on Corporations,  Authorities
  and Commissions

AN  ACT  to  amend  the business corporation law, in relation to profes-
  sional service corporations

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Section 1501 of the business corporation law is amended by
adding a new paragraph (f) to read as follows:
  (F) "ELIGIBLE EMPLOYEE STOCK OWNERSHIP PLAN" MEANS AN  EMPLOYEE  STOCK
OWNERSHIP  PLAN AS DEFINED IN SECTION 4975(E)(7) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, SPONSORED BY  A  PROFESSIONAL  SERVICE  CORPO-
RATION OR A FOREIGN PROFESSIONAL SERVICE CORPORATION AND WITH RESPECT TO
WHICH:
  (I)  ALL  OF  THE VOTING TRUSTEES OF THE EMPLOYEE STOCK OWNERSHIP PLAN
ARE INDIVIDUALS WHO ARE AUTHORIZED BY LAW TO PRACTICE IN  THIS  STATE  A
PROFESSION  WHICH SUCH CORPORATION IS AUTHORIZED TO PRACTICE AND WHO ARE
OR HAVE BEEN ENGAGED IN THE PRACTICE OF SUCH PROFESSION IN  SUCH  CORPO-
RATION  OR  A  PREDECESSOR ENTITY, OR WHO WILL ENGAGE IN THE PRACTICE OF
SUCH PROFESSION IN SUCH CORPORATION WITHIN THIRTY DAYS OF THE DATE  SUCH
INDIVIDUAL  IS  APPOINTED  TRUSTEE;  HOWEVER,  IF A CONFLICT OF INTEREST
EXISTS FOR ONE OR MORE TRUSTEES WITH RESPECT  TO  A  SPECIFIC  ISSUE  OR
TRANSACTION, SUCH TRUSTEES MAY APPOINT AN INDEPENDENT TRUSTEE OR SPECIAL
FIDUCIARY,  WHO  IS  NOT  AUTHORIZED  BY LAW TO PRACTICE IN THIS STATE A
PROFESSION WHICH SUCH CORPORATION IS AUTHORIZED TO  PRACTICE,  BUT  SUCH
INDEPENDENT  TRUSTEE  OR  SPECIAL  FIDUCIARY SHALL BE AUTHORIZED TO MAKE
DECISIONS ONLY WITH RESPECT TO THE SPECIFIC ISSUE OR TRANSACTION THAT IS
THE SUBJECT OF THE CONFLICT; AND
  (II) THE EMPLOYEE STOCK OWNERSHIP PLAN PROVIDES THAT NO SHARES, RIGHTS
OR OPTIONS TO PURCHASE SHARES OF THE CORPORATION SHALL AT  ANY  TIME  BE
ISSUED,  SOLD, OR OTHERWISE TRANSFERRED DIRECTLY TO ANYONE OTHER THAN AN
INDIVIDUAL DULY AUTHORIZED BY LAW TO PRACTICE IN THIS STATE A PROFESSION
WHICH SUCH CORPORATION IS AUTHORIZED TO PRACTICE, UNLESS SUCH SHARES ARE
TRANSFERRED AS A PLAN DISTRIBUTION TO A PLAN PARTICIPANT OR  BENEFICIARY

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD10985-01-9

S. 6994                             2

AND SUBJECT TO IMMEDIATE REPURCHASE BY THE PROFESSIONAL CORPORATION, THE
EMPLOYEE  STOCK  OWNERSHIP  PLAN OR ANOTHER PERSON AUTHORIZED UNDER THIS
ARTICLE TO HOLD SUCH SHARES.
  S 2. Section 1507 of the business corporation law, as amended by chap-
ter 1022 of the laws of 1971, is amended to read as follows:
S 1507. Issuance of shares.
  A  professional service corporation may issue shares only to AN ELIGI-
BLE EMPLOYEE STOCK OWNERSHIP PLAN OR TO individuals who  are  authorized
by  law to practice in this state a profession which such corporation is
authorized to practice and who are or have been engaged in the  practice
of  such  profession in such corporation or a predecessor entity, or who
will engage in the practice of such profession in such corporation with-
in thirty days of the date such shares are issued. No shareholder  of  a
professional  service corporation shall enter into a voting trust agree-
ment, proxy, or any other type  agreement  vesting  in  another  person,
other  than  another shareholder of the same corporation or a person who
would be eligible to become a shareholder  if  employed  by  the  corpo-
ration,  the  authority  to  exercise  voting power of any or all of his
shares.   All shares issued, agreements  made,  or  proxies  granted  in
violation of this section shall be void.
  S 3. Section 1511 of the business corporation law, as amended by chap-
ter 1022 of the laws of 1971, is amended to read as follows:
S 1511. Transfer of shares.
  No  shareholder  of  a  professional  service  corporation may sell or
transfer his shares in such corporation except to another individual who
is eligible to have shares issued to him by such corporation [or except]
in trust to another individual who would be eligible to  receive  shares
if he were employed by the corporation, OR TO AN ELIGIBLE EMPLOYEE STOCK
OWNERSHIP  PLAN. Nothing herein contained shall be construed to prohibit
the transfer of shares by operation of law or by court decree. No trans-
feree of shares by operation of law or court decree may vote the  shares
for any purpose whatsoever except with respect to corporate action under
section  nine hundred nine and section one thousand one. The restriction
in the preceding sentence shall not apply, however, where such transfer-
ee would be eligible to have shares issued to him if he were an employee
of the corporation and, if there are other shareholders, a  majority  of
such  other shareholders shall fail to redeem the shares so transferred,
pursuant to section 1510, within sixty days of receiving written  notice
of  such  transfer.  Any sale or transfer, except by operation of law or
court decree or except for a corporation having  only  one  shareholder,
may be made only after the same shall have been approved by the board of
directors,  or  at  a  shareholders'  meeting  specially called for such
purpose by such proportion, not less than a majority, of the outstanding
shares as may be provided in the certificate of incorporation or in  the
by-laws  of such professional service corporation. At such shareholders'
meeting the shares held by the shareholder proposing to sell or transfer
his shares may not be voted or  counted  for  any  purpose,  unless  all
shareholders  consent  that such shares be voted or counted. The certif-
icate of incorporation or the by-laws of the professional service corpo-
ration, or the professional service corporation and the shareholders  by
private agreement, may provide, in lieu of or in addition to the forego-
ing provisions, for the alienation of shares and may require the redemp-
tion  or  purchase of such shares by such corporation at prices and in a
manner  specifically  set  forth  therein.     The  existence   of   the
restrictions  on  the  sale  or transfer of shares, as contained in this
article  and,  if  applicable,  in  the  certificate  of  incorporation,

S. 6994                             3

by-laws,  stock  purchase  or stock redemption agreement, shall be noted
conspicuously on the face or back of every certificate for shares issued
by a  professional  service  corporation.    Any  sale  or  transfer  in
violation of such restrictions shall be void.
  S 4. Paragraph (d) of section 1525 of the business corporation law, as
added by chapter 505 of the laws of 1983, is amended to read as follows:
  (d) "Foreign  professional  service  corporation" means a professional
service corporation, whether or not denominated as such, organized under
the laws of a jurisdiction other than this state, all of the  sharehold-
ers  (INCLUDING  THE  TRUSTEES  OF  AN ELIGIBLE EMPLOYEE STOCK OWNERSHIP
PLAN, IF APPLICABLE), directors and officers of which are authorized and
licensed to practice  the  profession  for  which  such  corporation  is
licensed  to  do  business;  except that all shareholders, directors and
officers of a foreign professional service  corporation  which  provides
health services in this state shall be licensed in this state.
  S 5. Section 1531 of the business corporation law, as amended by chap-
ter 538 of the laws of 2001, is amended to read as follows:
S 1531. Annual statement.
  Each  foreign  professional  service  corporation shall, at least once
[of] each year on or before the date prescribed by the licensing author-
ity, furnish a statement to the licensing authority listing the name and
residence address of each shareholder  (INCLUDING  THE  TRUSTEES  OF  AN
ELIGIBLE  EMPLOYEE STOCK OWNERSHIP PLAN, IF APPLICABLE), director, offi-
cer and corporate employee licensed  by  such  licensing  authority  and
certifying  that  such  individuals  intending  to practice a profession
which such foreign professional service  corporation  is  authorized  to
practice  in this state are licensed to practice said profession in this
state. In the case of a foreign professional service corporation provid-
ing health services, such statement shall also certify that each  share-
holder,  officer and director of the corporation is licensed to practice
said profession in this state. The statement  shall  be  signed  by  the
president  or  any  vice-president of the corporation and attested to by
the secretary or any assistant secretary of the corporation.
  S 6. This act shall take effect immediately.