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

                                 5868--A

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                              June 9, 2015
                               ___________

Introduced  by  Sen.  RANZENHOFER -- read twice and ordered printed, and
  when printed to be committed to the Committee on  Rules  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

AN  ACT to amend the not-for-profit corporation law, the estates, powers
  and trusts law and the religious corporations law, in relation to  the
  reform of charitable corporations

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

  Section 1. Subparagraphs 6-a, 19, 21, 22, 23 and 25 of  paragraph  (a)
of  section 102 of the not-for-profit corporation law, as added by chap-
ter 549 of the laws of 2013, are amended to read as follows:
  (6-a) "Entire board" means the total number of directors  entitled  to
vote which the corporation would have if there were no vacancies. If the
by-laws  of  the  corporation  provide that the board shall consist of a
fixed number of directors, then the "entire board" shall consist of that
number of directors. If the by-laws of any corporation provide that  the
board  may  consist  of  a range between a minimum and maximum number of
directors, AND THE NUMBER WITHIN  THAT  RANGE  HAS  NOT  BEEN  FIXED  IN
ACCORDANCE WITH PARAGRAPH (A) OF SECTION SEVEN HUNDRED TWO OF THIS CHAP-
TER,  then  the  "entire board" shall consist of the number of directors
within such range that were elected OR APPOINTED as of the most recently
held election of directors, AS WELL AS ANY DIRECTORS  WHOSE  TERMS  HAVE
NOT YET EXPIRED.
  (19)  An  "affiliate" of a corporation means any entity controlled by,
OR in control of, [or under common control with] such corporation.
  (21) "Independent director" means a director who: (i) is not, and  has
not  been within the last three years, an employee of the corporation or
an affiliate of the corporation, and does not have a relative who is, or
has been within the last three years, a key employee of the  corporation
or  an affiliate of the corporation; (ii) has not received, and does not

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11470-04-5
              

S. 5868--A                          2

have a relative who has received, in any of the last three fiscal years,
more than ten thousand dollars in direct compensation  from  the  corpo-
ration  or an affiliate of the corporation (other than reimbursement for
expenses  reasonably  incurred  as a director or reasonable compensation
for service as a director as permitted by paragraph (a) of  section  202
(General  and special powers)); [and] (iii) is not a current employee of
or does not have a substantial financial interest in, and does not  have
a  relative  who  is a current officer of or has a substantial financial
interest in, any entity that has made payments to, or received  payments
from, the corporation or an affiliate of the corporation for property or
services  in  an  amount  which,  in any of the last three fiscal years,
exceeds the lesser of twenty-five thousand dollars  or  two  percent  of
such  entity's  consolidated gross revenues; OR (IV) IS NOT AND DOES NOT
HAVE A RELATIVE WHO IS A CURRENT OWNER,  WHETHER  WHOLLY  OR  PARTIALLY,
DIRECTOR,  OFFICER  OR  EMPLOYEE OF THE CORPORATION'S OUTSIDE AUDITOR OR
WHO HAS WORKED ON THE CORPORATION'S AUDIT AT ANY TIME  DURING  THE  PAST
THREE  YEARS. For purposes of this [subparagraph] SUBDIVISION, "payment"
does not include charitable contributions, DUES  OR  FEES  PAID  TO  THE
CORPORATION  FOR  SERVICES WHICH THE CORPORATION PERFORMS AS PART OF ITS
NONPROFIT PURPOSES, PROVIDED THAT SUCH SERVICES ARE AVAILABLE  TO  INDI-
VIDUAL MEMBERS OF THE PUBLIC ON THE SAME TERMS.
  (22)  "Relative"  of  an  individual means [his or her] (i) HIS OR HER
spouse[,] OR DOMESTIC PARTNER AS DEFINED IN SECTION TWENTY-NINE  HUNDRED
NINETY-FOUR-A  OF  THE  PUBLIC  HEALTH  LAW;  (II) HIS OR HER ancestors,
brothers and sisters (whether whole or half  blood),  children  (whether
natural  or adopted), grandchildren, great-grandchildren[, and spouses];
OR (III) THE SPOUSE OR DOMESTIC PARTNER of HIS OR HER brothers, sisters,
children, grandchildren,  and  great-grandchildren[;  or  (ii)  domestic
partner  as  defined in section twenty-nine hundred ninety-four-a of the
public health law].
  (23) "Related party" means (i) any director, officer or  key  employee
of  the  corporation  or  any affiliate of the corporation, OR ANY OTHER
PERSON WHO EXERCISES THE POWERS OF DIRECTORS, OFFICERS OR KEY  EMPLOYEES
OVER THE AFFAIRS OF THE CORPORATION OR ANY AFFILIATE OF THE CORPORATION;
(ii)  any  relative  of  any  [director,  officer or key employee of the
corporation or any affiliate of the corporation] INDIVIDUAL DESCRIBED IN
CLAUSE (I) OF THIS SUBDIVISION; or (iii) any entity in which  any  indi-
vidual described in clauses (i) and (ii) of this [subparagraph] SUBDIVI-
SION has a thirty-five percent or greater ownership or beneficial inter-
est  or,  in  the  case  of a partnership or professional corporation, a
direct or indirect ownership interest in excess of five percent.
  (25) "Key employee" means any person who is in a position to  exercise
substantial influence over the affairs of the corporation, as referenced
in  26  U.S.C.  S  4958(f)(1)(A)  and  further  specified  in  26  CFR S
53.4958-3(c), (d) and (e), or succeeding provisions TO THE  EXTENT  SUCH
PROVISIONS ARE APPLICABLE.
  S  2.  Paragraph  (b) of section 515 of the not-for-profit corporation
law, as amended by chapter 549 of the laws of 2013, is amended  to  read
as follows:
  (b)  A  corporation  may  pay  compensation  in a reasonable amount to
members, directors, or officers, for services  rendered,  and  may  make
distributions  of  cash or property to members upon dissolution or final
liquidation as permitted by this chapter. No person who may benefit from
such compensation may be present at  or  otherwise  participate  in  any
board or committee deliberation or vote concerning such person's compen-
sation;  provided  that nothing in this section shall prohibit the board

S. 5868--A                          3

or authorized committee from requesting that a person  who  may  benefit
from such compensation present information as background or answer ques-
tions  at  a  committee  or  board  meeting prior to the commencement of
deliberations  or voting relating thereto. NOTHING IN THIS SECTION OR IN
PARAGRAPH (H) OF SECTION SEVEN HUNDRED FIFTEEN OF THIS CHAPTER SHALL  BE
CONSTRUED  TO PROHIBIT A DIRECTOR FROM DELIBERATING OR VOTING CONCERNING
COMPENSATION FOR SERVICE ON THE BOARD THAT IS TO BE  MADE  AVAILABLE  OR
PROVIDED TO ALL DIRECTORS OF THE CORPORATION ON THE SAME OR SUBSTANTIAL-
LY SIMILAR TERMS.
  S  3.  Paragraph  (b) of section 702 of the not-for-profit corporation
law is amended to read as follows:
  (b) The number of directors may be increased or decreased by amendment
of the by-laws or[, in the case of a  corporation  having  members,]  by
action  of the members, or of the board under the specific provisions of
a by-law [adopted by the members], subject to the following limitations:
  (1) If the board is authorized by the by-laws to change the number  of
directors, whether by amending the by-laws or by taking action under the
specific provisions of a by-law [adopted by the members], such amendment
or action shall require the vote of a majority of the entire board.
  (2) No decrease shall shorten the term of any incumbent director.
  S  4.  Paragraph  (d) of section 708 of the not-for-profit corporation
law, as amended by chapter 173 of the laws of 1975 and as relettered  by
chapter 314 of the laws of 1977, is amended to read as follows:
  (d) Except as otherwise provided in this chapter, the vote of a major-
ity  of  the  directors  present at the time of the vote, if a quorum is
present at such time, shall be the act of the board. DIRECTORS  WHO  ARE
PRESENT  AT  A  MEETING  BUT  NOT PRESENT AT THE TIME OF A VOTE DUE TO A
CONFLICT OF INTEREST OR RELATED PARTY TRANSACTION SHALL BE DETERMINED TO
BE PRESENT AT THE TIME OF THE VOTE FOR PURPOSES OF THIS PARAGRAPH.
  S 5. Paragraph (e) of section 712 of  the  not-for-profit  corporation
law,  as  amended by chapter 549 of the laws of 2013, is amended to read
as follows:
  (e) Committees, other than committees of the board, whether created by
the board or by the members, shall be  committees  of  the  corporation.
[Such  committees  of the corporation may be elected or appointed in the
same manner as officers of the corporation, but no]  NO  such  committee
shall  have  the authority to bind the board. Provisions of this chapter
applicable to officers generally shall apply to members of such  commit-
tees.  [Such]  MEMBERS OF SUCH committees of the corporation, WHO MAY BE
NON-DIRECTORS, shall be elected or appointed in the manner set forth  in
the  by-laws,  or if not set forth in the by-laws, in the same manner as
officers of the corporation.
  S 6. Paragraph (e) of section 712-a of the not-for-profit  corporation
law,  as added by chapter 549 of the laws of 2013, is amended to read as
follows:
  (e) Only independent directors may participate in any board or commit-
tee deliberations or voting  relating  to  matters  set  forth  in  this
section,  PROVIDED  THAT  NOTHING  IN  THIS PARAGRAPH SHALL PROHIBIT THE
BOARD OR DESIGNATED AUDIT COMMITTEE FROM REQUESTING THAT A  PERSON  WITH
AN  INTEREST  IN  THE MATTER PRESENT INFORMATION AS BACKGROUND OR ANSWER
QUESTIONS AT A COMMITTEE OR BOARD MEETING PRIOR TO THE  COMMENCEMENT  OF
DELIBERATIONS OR VOTING RELATING THERETO.
  S  7.  Paragraphs (e), (f), (f) and (g) of section 715 of the not-for-
profit corporation law, paragraph (e) as amended and paragraphs (f), (f)
and (g) as added by chapter 549 of the laws of 2013, are amended to read
as follows:

S. 5868--A                          4

  (e) The fixing of [salaries] COMPENSATION of officers, if not done  in
or  pursuant  to  the  by-laws,  shall require the affirmative vote of a
majority of the entire board unless a higher proportion is  set  by  the
certificate of incorporation or by-laws.
  (f)  The  attorney  general  may  bring  an  action to enjoin, void or
rescind any related party transaction or proposed related  party  trans-
action  that violates any provision of this chapter or was otherwise not
reasonable or in the best interests of the corporation at the  time  the
transaction  was  approved,  or  to seek restitution, and the removal of
directors or officers, or seek to require any person or entity to:
  (1) Account for any profits made from such transaction, and  pay  them
to the corporation;
  (2) Pay the corporation the value of the use of any of its property or
other assets used in such transaction;
  (3)  Return or replace any property or other assets lost to the corpo-
ration as a result of such transaction,  together  with  any  income  or
appreciation  lost  to the corporation by reason of such transaction, or
account for any proceeds of sale of such property, and pay the  proceeds
to the corporation together with interest at the legal rate; and
  (4)  Pay, in the case of willful and intentional conduct, an amount up
to double the amount of any benefit improperly obtained.
  [(f)] (G) The powers of the attorney general provided in this  section
are  in addition to all other powers the attorney general may have under
this chapter or any other law.
  [(g)] (H) No related party may participate in deliberations or  voting
relating  to  [matters set forth in this section] A RELATED PARTY TRANS-
ACTION IN WHICH HE OR SHE HAS AN INTEREST; provided that nothing in this
section shall prohibit the board or authorized committee from requesting
that a related party present information AS BACKGROUND OR  ANSWER  QUES-
TIONS  concerning  a  related  party transaction at a board or committee
meeting prior to the commencement of deliberations  or  voting  relating
thereto.
  S  8. Subparagraph 3 of paragraph (b) of section 715-a of the not-for-
profit corporation law, as added by chapter 549 of the laws of 2013,  is
amended to read as follows:
  (3) a requirement that the person with the conflict of interest not be
present  at or participate in board or committee deliberation or vote on
the matter giving rise to such conflict, PROVIDED THAT NOTHING  IN  THIS
SECTION SHALL PROHIBIT THE BOARD OR A COMMITTEE FROM REQUESTING THAT THE
PERSON  WITH  THE CONFLICT OF INTEREST PRESENT INFORMATION AS BACKGROUND
OR ANSWER QUESTIONS AT  A  COMMITTEE  OR  BOARD  MEETING  PRIOR  TO  THE
COMMENCEMENT OF DELIBERATIONS OR VOTING RELATING THERETO;
  S  9. Paragraph (c) of section 715-a of the not-for-profit corporation
law, as added by chapter 549 of the laws of 2013, is amended to read  as
follows:
  (c)  The  conflict  of interest policy shall require that prior to the
initial election of any director, and annually thereafter, such director
shall complete, sign and submit to the secretary of the corporation OR A
DESIGNATED COMPLIANCE OFFICER a written statement  identifying,  to  the
best  of  the director's knowledge, any entity of which such director is
an officer, director, trustee, member, owner (either as a sole  proprie-
tor  or  a  partner),  or  employee and with which the corporation has a
relationship, and any transaction in which the corporation is a  partic-
ipant  and  in which the director might have a conflicting interest. The
policy shall require that each director annually resubmit  such  written
statement.  The  secretary  of the corporation OR THE DESIGNATED COMPLI-

S. 5868--A                          5

ANCE OFFICER shall provide a copy of all  completed  statements  to  the
chair  of the audit committee or, if there is no audit committee, to the
chair of the board.
  S 10. Subparagraph 3 of paragraph (b) of section 715-b of the not-for-
profit  corporation law, as added by chapter 549 of the laws of 2013, is
amended to read as follows:
  (3) A requirement that a copy of the  policy  be  distributed  to  all
directors, officers, employees and to volunteers who provide substantial
services  to  the corporation. FOR PURPOSES OF THIS SUBDIVISION, POSTING
THE POLICY ON THE CORPORATION'S WEBSITE OR AT THE CORPORATION'S  OFFICES
IN  A  CONSPICUOUS  LOCATION  ACCESSIBLE TO EMPLOYEES AND VOLUNTEERS ARE
AMONG THE METHODS A CORPORATION MAY  USE  TO  SATISFY  THE  DISTRIBUTION
REQUIREMENT.
  S  11. Paragraph (b) of section 1407 of the not-for-profit corporation
law, as amended by chapter 549 of the laws of 2013, is amended  to  read
as follows:
  (b) Type of corporation.
  An alumni corporation is a [non-charitable] CHARITABLE corporation.
  S 12. Subparagraphs 3, 4, 5, 6 and 7 of paragraph (a) of section 8-1.9
of  the  estates,  powers and trusts law, as added by chapter 549 of the
laws of 2013, are amended to read as follows:
  (3) "Key employee" means any person who is in a position  to  exercise
substantial  influence  over  the affairs of the [corporation] TRUST, as
referenced in 26 U.S.C. section 4958(f)(1)(A) and further  specified  in
26  C.F.R.   section 53.4958-3(c), (d) and (e), or succeeding provisions
TO THE EXTENT SUCH PROVISIONS ARE APPLICABLE.
  (4) An "affiliate" of a trust means any entity controlled  by,  OR  in
control of, [or under common control with] such trust.
  (5)  "Relative"  of  an  individual  means [his or her] (i) HIS OR HER
spouse[,] OR DOMESTIC PARTNER AS DEFINED IN SECTION TWENTY-NINE  HUNDRED
NINETY-FOUR-A  OF  THE  PUBLIC  HEALTH  LAW;  (II) HIS OR HER ancestors,
brothers and sisters (whether whole or half  blood),  children  (whether
natural  or adopted), grandchildren, great-grandchildren[, and spouses];
OR (III) THE SPOUSE OR DOMESTIC PARTNER of HIS OR HER brothers, sisters,
children, grandchildren, and great-grandchildren[; and (ii) his  or  her
domestic partner as defined in section twenty-nine hundred ninety-four-a
of the public health law].
  (6) "Related party" means (i) any trustee or key employee of the trust
or  any  affiliate  of  the  trust OR ANY OTHER PERSON WHO EXERCISES THE
POWERS OF A TRUSTEE OR KEY EMPLOYEE OVER THE AFFAIRS OF THE TRUST OR ANY
AFFILIATE OF THE TRUST; (ii) any relative of any [trustee or key employ-
ee of the trust or any affiliate of the trust] INDIVIDUAL  DESCRIBED  IN
CLAUSE (I) OF THIS SUBDIVISION; or (iii) an entity in which any individ-
ual described in clauses (i) and (ii) of this [subparagraph] SUBDIVISION
has  a  thirty-five  percent or greater ownership or beneficial interest
or, in the case of a partnership or professional corporation,  a  direct
ownership interest in excess of five percent.
  (7) "Independent trustee" means a trustee who: (i) is not, and has not
been  within the last three years, an employee of the trust or an affil-
iate of the trust, and does not have a relative  who  is,  or  has  been
within the last three years, a key employee of the trust or an affiliate
of  the  trust;  (ii) has not received, and does not have a relative who
has received, in any of the last three fiscal years, more than ten thou-
sand dollars in direct compensation from the trust or  an  affiliate  of
the trust (other than reimbursement for expenses or the payment of trus-
tee  commissions  OR REASONABLE COMPENSATION as permitted by law and the

S. 5868--A                          6

governing instrument); [and] (iii) is not a current employee of or  does
not  have a substantial financial interest in, and does not have a rela-
tive who is a current officer of or have a substantial financial  inter-
est in, any entity that has made payments to, or received payments from,
the  trust  or  an affiliate of the trust for property or services in an
amount which, in any of the last three fiscal years, exceeds the  lesser
of  twenty-five thousand dollars or two percent of such entity's consol-
idated gross revenues; OR (IV) IS NOT AND DOES NOT HAVE A  RELATIVE  WHO
IS  A  CURRENT  OWNER, WHETHER WHOLLY OR PARTIALLY, DIRECTOR, OFFICER OR
EMPLOYEE OF THE TRUST'S OUTSIDE AUDITOR OR WHO HAS WORKED ON THE TRUST'S
AUDIT AT ANY TIME DURING THE PAST THREE  YEARS.  For  purposes  of  this
[subparagraph]   SUBDIVISION,  "payment"  does  not  include  charitable
contributions, DUES OR FEES PAID TO THE TRUST  FOR  SERVICES  WHICH  THE
TRUST PERFORMS AS PART OF ITS NONPROFIT PURPOSES.
  S 13. Subparagraph 5 of paragraph (b) of section 8-1.9 of the estates,
powers  and  trusts law, as added by chapter 549 of the laws of 2013, is
amended to read as follows:
  (5) Only independent trustees  may  participate  in  deliberations  or
voting  relating  to  matters  set  forth  in  this [paragraph] SECTION,
PROVIDED THAT NOTHING IN THIS PARAGRAPH  SHALL  PROHIBIT  THE  BOARD  OR
DESIGNATED  AUDIT COMMITTEE FROM REQUESTING THAT A PERSON WITH AN INTER-
EST IN THE MATTER PRESENT INFORMATION AS BACKGROUND OR ANSWER  QUESTIONS
AT  A  COMMITTEE  OR BOARD MEETING PRIOR TO THE COMMENCEMENT OF DELIBER-
ATIONS OR VOTING RELATING THERETO.
  S 14. Subparagraph 6 of paragraph (c) of section 8-1.9 of the estates,
powers and trusts law, as added by chapter 549 of the laws of  2013,  is
amended to read as follows:
  (6) No related party may participate in deliberations or voting relat-
ing to [matters set forth in this paragraph] A RELATED PARTY TRANSACTION
IN  WHICH  HE  OR  SHE  HAS  AN  INTEREST; provided that nothing in this
section shall prohibit the trustees or designated audit  committee  from
requesting  that a related party present information OR ANSWER QUESTIONS
concerning a related party transaction at a trustees or committee  meet-
ing prior to the commencement of deliberations or voting relating to the
related party transaction.
  S  15.  Clause (C) of subparagraph 2 of paragraph (d) of section 8-1.9
of the estates, powers and trusts law, as added by chapter  549  of  the
laws of 2013, is amended to read as follows:
  (C) a requirement that the person with the conflict of interest not be
present  at  or  participate  in  any deliberation or vote on the matter
giving rise to such conflict, PROVIDED  THAT  NOTHING  IN  THIS  SECTION
SHALL  PROHIBIT  THE  TRUSTEES  OR  A COMMITTEE FROM REQUESTING THAT THE
PERSON WITH THE CONFLICT OF INTEREST PRESENT INFORMATION  AS  BACKGROUND
OR  ANSWER  QUESTIONS  AT  A  TRUSTEES OR COMMITTEE MEETING PRIOR TO THE
COMMENCEMENT OF DELIBERATIONS OR VOTING RELATING THERETO;
  S 16. Clause (C) of subparagraph 2 of paragraph (e) of  section  8-1.9
of  the  estates,  powers and trusts law, as added by chapter 549 of the
laws of 2013, is amended to read as follows:
  (C) A requirement that a copy of the  policy  be  distributed  to  all
trustees,  officers,  employees and volunteers, with instructions on how
to comply with the procedures set forth in the policy. FOR  PURPOSES  OF
THIS  SUBDIVISION, POSTING THE POLICY ON THE CORPORATION'S WEBSITE OR AT
THE CORPORATION'S  OFFICES  IN  A  CONSPICUOUS  LOCATION  ACCESSIBLE  TO
EMPLOYEES  AND VOLUNTEERS ARE AMONG THE METHODS A CORPORATION MAY USE TO
SATISFY THE DISTRIBUTION REQUIREMENT.

S. 5868--A                          7

  S 17. Subdivision 1 of section 12 of the religious  corporations  law,
as  amended  by  chapter  244 of the laws of 1981, is amended to read as
follows:
  1.  A  religious  corporation  shall not sell, mortgage or lease for a
term exceeding five years any of its real property without applying  for
and obtaining leave of the court OR THE ATTORNEY GENERAL therefor pursu-
ant to section five hundred eleven of the not-for-profit corporation law
as  that section is modified by paragraph (d-1) of [subsection] SUBDIVI-
SION one of section two-b  of  this  chapter  OR  SECTION  FIVE  HUNDRED
ELEVEN-A  OF THE NOT-FOR-PROFIT CORPORATION LAW, except that a religious
corporation may execute a purchase money mortgage or  a  purchase  money
security  agreement  creating  a  security interest in personal property
purchased by it without obtaining leave of the court therefor.
  S 18. Severability. If any clause,  sentence,  paragraph,  section  or
part  of  this act shall be adjudged by any court of competent jurisdic-
tion to be invalid, the judgment shall not affect, impair, or invalidate
the remainder thereof, but shall be confined in  its  operation  to  the
clause,  sentence,  paragraph, section or part thereof directly involved
in the controversy in which the judgment shall have been rendered.
  S 19. This act shall take effect immediately.