BILL NUMBER: S8638

SPONSOR: GALLIVAN
 
TITLE OF BILL:

An act to amend the not-for-profit corporation law, in relation to
directors of controlled corporations serving on designated audit commit-
tees of the controlling corporations

 
PURPOSE OR GENERAL IDEA OF BILL:

To permit voting directors from subsidiaries to serve as voting members
of a parent's audit committee.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section one of the bill amends paragraph d of section 712-a of the not-
for-profit corporation law to provide that directors from one or more
controlled corporations may serve on any designated audit committee of
the board of the controlling corporation and perform the duties required
by this section for each corporation and any controlled corporations.
              

Section two provides the effective date.

 
JUSTIFICATION:

Many nonprofit corporations are comprised of a nonprofit (generally
referred to as a "parent") which controls one or more subsidiaries.
This legislation will expressly permit voting directors from subsid-
iaries, who do not themselves serve on the parent nonprofit's board of
directors, to serve as voting members of a parent's audit committee, for
the purposes of overseeing audits of the parent or any subsidiary corpo-
rations. Currently, the not-for-profit corporation law (NPCL) provides
that only the board of directors of a controlling corporation, or a
designated "audit committee of the board" of such entity, may assume
sole oversight of all financial audits, for both the controlling corpo-
ration and any subsidiaries.

Amending the NPCL to include voting directors of subsidiaries in the
audit process would allow for the service of informed and financially
knowledgeable individuals.

 
PRIOR LEGISLATIVE HISTORY:

New bill

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
Immediately.