S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9012
 
                        2025-2026 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              August 13, 2025
                                ___________
 
 Introduced by M. of A. KELLES -- read once and referred to the Committee
   on Corporations, Authorities and Commissions
 
 AN  ACT to amend the not-for-profit corporation law, the business corpo-
   ration law and the public health law, in relation to prohibiting  non-
   physician  management  services organizations or their representatives
   to hold majority shares in  or  serve  as  directors  of  professional
   corporations organized to practice medicine
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The not-for-profit corporation law is amended by adding two
 new sections 1406-a and 1406-b to read as follows:
 § 1406-A. PROFESSIONAL CORPORATIONS; MEDICINE.
   (A) AS USED IN THIS  SECTION,  THE  FOLLOWING  TERMS  SHALL  HAVE  THE
 FOLLOWING MEANINGS:
   (1) "PROFESSIONAL CORPORATION" MEANS A PROFESSIONAL CORPORATION ORGAN-
 IZED FOR THE PURPOSE OF PRACTICING MEDICINE.
   (2)  "PRACTICE OF MEDICINE", "PRACTICING MEDICINE" OR ANY VARIATION OF
 SUCH TERM SHALL HAVE THE SAME MEANING AS THE TERM "PRACTICE OF MEDICINE"
 IS DEFINED BY SECTION SIXTY-FIVE HUNDRED  TWENTY-TWO  OF  THE  EDUCATION
 LAW.
   (B) (1) IN A PROFESSIONAL CORPORATION: (I) PHYSICIANS WHO ARE LICENSED
 IN THIS STATE TO PRACTICE MEDICINE SHALL HOLD THE MAJORITY OF EACH CLASS
 OF SHARES WHICH ARE ENTITLED TO VOTE;
   (II)  PHYSICIANS  WHO  ARE LICENSED IN THIS STATE TO PRACTICE MEDICINE
 SHALL BE A MAJORITY OF THE DIRECTORS; AND
   (III) ALL OFFICERS, EXCEPT THE SECRETARY AND TREASURER, IF ANY,  SHALL
 BE  PHYSICIANS  WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDICINE. THE
 SAME PERSON MAY HOLD ANY TWO OR MORE OFFICES.
   (2) EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT OF HEALTH  MAY
 REQUIRE THAT PHYSICIANS WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDI-

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD13396-02-5
 A. 9012                             2
              

 
 CINE  HOLD MORE THAN A MAJORITY OF EACH CLASS OF SHARES THAT IS ENTITLED
 TO VOTE.
   (3)  EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT OF HEALTH MAY
 REQUIRE THAT PHYSICIANS WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDI-
 CINE BE MORE THAN A MAJORITY OF THE DIRECTORS.
   (C) A CORPORATION WHICH IS NOT ORGANIZED FOR THE PURPOSE OF PRACTICING
 MEDICINE MAY BE A SHAREHOLDER OF A PROFESSIONAL CORPORATION  SOLELY  FOR
 THE PURPOSE OF EFFECTING A REORGANIZATION AS DEFINED BY 26 USC 368.
   (D)(1)  EXCEPT  AS  PROVIDED  IN SUBPARAGRAPH (2) OF THIS PARAGRAPH, A
 PROFESSIONAL CORPORATION SHALL NOT PROVIDE IN SUCH  PROFESSIONAL  CORPO-
 RATION'S  ARTICLES OF INCORPORATION OR BYLAWS, OR BY MEANS OF A CONTRACT
 OR OTHER AGREEMENT OR ARRANGEMENT, FOR REMOVING A DIRECTOR, APPOINTED IN
 ACCORDANCE WITH SUBPARAGRAPH (1) OF PARAGRAPH (B) OF THIS SECTION,  FROM
 SUCH  PROFESSIONAL  CORPORATION'S  BOARD  OF  DIRECTORS,  OR AN OFFICER,
 APPOINTED IN ACCORDANCE WITH SUBPARAGRAPH (1) OF PARAGRAPH (B)  OF  THIS
 SECTION,  FROM  SUCH PERSON'S POSITION IN SUCH PROFESSIONAL CORPORATION,
 EXCEPT BY A MAJORITY VOTE OF THE  SHAREHOLDERS  OR,  AS  APPROPRIATE,  A
 MAJORITY VOTE OF THE DIRECTORS.
   (2)  A  PROFESSIONAL  CORPORATION  MAY REMOVE A DIRECTOR OR OFFICER BY
 MEANS OTHER THAN A MAJORITY VOTE OF THE SHAREHOLDERS OR A MAJORITY  VOTE
 OF THE DIRECTORS IF SUCH DIRECTOR OR OFFICER THAT IS SUBJECT TO REMOVAL:
   (I)  VIOLATED  A DUTY OF CARE, A DUTY OF LOYALTY, OR ANOTHER FIDUCIARY
 DUTY TO SUCH PROFESSIONAL CORPORATION;
   (II) WAS THE SUBJECT OF A DISCIPLINARY PROCEEDING BY THE DEPARTMENT OF
 HEALTH, THE DEPARTMENT OF EDUCATION, OR THE STATE BOARD FOR MEDICINE, IN
 THIS STATE, OR SUCH EQUIVALENT ENTITY IN ANOTHER STATE,  IN  WHICH  SUCH
 DIRECTOR  OR  OFFICER'S  LICENSE TO PRACTICE MEDICINE IN THIS OR ANOTHER
 STATE WAS SUSPENDED OR REVOKED;
   (III) ENGAGED IN FRAUD, MISFEASANCE, OR MALFEASANCE  WITH  RESPECT  TO
 THE DIRECTOR OR OFFICER'S PERFORMANCE OF DUTIES FOR OR ON BEHALF OF SUCH
 PROFESSIONAL CORPORATION;
   (IV)  RESIGNED, SEPARATED, OR WAS TERMINATED FROM EMPLOYMENT WITH SUCH
 PROFESSIONAL CORPORATION; OR
   (V) FAILED TO MEET STANDARDS OR CRITERIA SUCH PROFESSIONAL CORPORATION
 ESTABLISHED FOR A POSITION AS A DIRECTOR OR OFFICER.
   (E) A PROFESSIONAL CORPORATION MAY RELINQUISH OR TRANSFER CONTROL OVER
 SUCH PROFESSIONAL CORPORATION'S ADMINISTRATIVE,  BUSINESS,  OR  CLINICAL
 OPERATIONS  ONLY IF SUCH PROFESSIONAL CORPORATION EXECUTES A SHAREHOLDER
 AGREEMENT EXCLUSIVELY BETWEEN OR AMONG AND FOR THE BENEFIT OF A MAJORITY
 OF SHAREHOLDERS WHO ARE PHYSICIANS LICENSED IN THIS  STATE  TO  PRACTICE
 MEDICINE  AND SUCH SHAREHOLDER AGREEMENT COMPLIES WITH THE PROVISIONS OF
 ARTICLE SIX OF THE BUSINESS CORPORATION LAW.
   (F)(1) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO:
   (I) A NONPROFIT CORPORATION THAT IS ORGANIZED UNDER THE LAWS  OF  THIS
 STATE  TO  PROVIDE MEDICAL SERVICES TO MIGRANT, RURAL, HOMELESS OR OTHER
 MEDICALLY UNDERSERVED POPULATIONS UNDER 42  USC  254B  OR  254C,  AS  IN
 EFFECT ON THE EFFECTIVE DATE OF THIS SECTION;
   (II)  A  FEDERALLY-QUALIFIED  HEALTH  CENTER,  AS  DEFINED  BY  42 USC
 1396D(I), AS IN EFFECT ON THE EFFECTIVE DATE OF THIS SECTION, THAT OPER-
 ATES IN COMPLIANCE WITH OTHER APPLICABLE STATE OR FEDERAL LAW; OR
   (III) EXCEPT AS PROVIDED IN SUBPARAGRAPH  (2)  OF  THIS  PARAGRAPH,  A
 FOR-PROFIT  OR  NONPROFIT BUSINESS ENTITY THAT IS INCORPORATED OR ORGAN-
 IZED UNDER THE LAWS OF THIS STATE, THAT PROVIDES  THE  ENTIRETY  OF  THE
 BUSINESS  ENTITY'S  MEDICAL  SERVICES  THROUGH  ONE OR MORE RURAL HEALTH
 CLINICS, AS DEFINED IN 42 USC 1395X, AS IN EFFECT ON THE EFFECTIVE  DATE
 A. 9012                             3
 
 OF  THIS SECTION, AND THAT OPERATES IN COMPLIANCE WITH STATE AND FEDERAL
 LAWS THAT APPLY TO RURAL HEALTH CLINICS.
   (2)  A  BUSINESS ENTITY IS EXEMPT UNDER THIS PARAGRAPH FOR A PERIOD OF
 UP TO ONE YEAR AFTER THE BUSINESS  ENTITY  ESTABLISHES  A  RURAL  HEALTH
 CLINIC,  EVEN  THOUGH  THE  RURAL HEALTH CLINIC THAT THE BUSINESS ENTITY
 ESTABLISHES DOES NOT MEET ALL OF THE  ELEMENTS  OF  THE  DEFINITION  SET
 FORTH  IN  42  USC  1395X,  AS  IN  EFFECT ON THE EFFECTIVE DATE OF THIS
 SECTION, IF DURING SUCH ONE-YEAR PERIOD AN APPLICABLE CERTIFICATION  FOR
 SUCH RURAL HEALTH CLINIC IS PENDING.
   (G)  A  PROFESSIONAL CORPORATION OR MEDICAL SERVICES CORPORATION SHALL
 NOT TAKE ANY RETALIATORY ACTION, AS DEFINED  BY  SECTION  SEVEN  HUNDRED
 FORTY  OF  THE LABOR LAW, AGAINST A MEDICAL LICENSEE AS RETALIATION FOR,
 OR AS A CONSEQUENCE OF, SUCH MEDICAL LICENSEE'S VIOLATION OF  A  NONDIS-
 CLOSURE AGREEMENT OR NON-DISPARAGEMENT AGREEMENT OR BECAUSE SUCH MEDICAL
 LICENSEE,  IN  GOOD  FAITH,  DISCLOSED OR REPORTED INFORMATION THAT SUCH
 MEDICAL LICENSEE BELIEVES IS EVIDENCE OF A VIOLATION  OF  A  FEDERAL  OR
 STATE LAW, RULE OR REGULATION TO:
   (1) THE MANAGEMENT SERVICES ORGANIZATION;
   (2)  A HOSPITAL, AS DEFINED IN SECTION TWENTY-EIGHT HUNDRED ONE OF THE
 PUBLIC HEALTH LAW; OR
   (3) A STATE OR FEDERAL AUTHORITY.
 § 1406-B. PROFESSIONAL CORPORATIONS; HEALTH CARE SERVICES.
   (A) AS USED IN THIS  SECTION,  THE  FOLLOWING  TERMS  SHALL  HAVE  THE
 FOLLOWING MEANINGS:
   (1) "LICENSEE" MEANS AN INDIVIDUAL WHO HAS A LICENSE AS A PHYSICIAN OR
 A  LICENSE AS A PHYSICIAN ASSOCIATE FROM THE STATE BOARD FOR MEDICINE OR
 THE DEPARTMENT OF EDUCATION OR WHO HAS A LICENSE AS A NURSE PRACTITIONER
 FROM THE STATE BOARD FOR NURSING OR THE DEPARTMENT OF EDUCATION.
   (2) "PROFESSIONAL CORPORATION" MEANS A PROFESSIONAL  CORPORATION  THAT
 IS  ORGANIZED  FOR THE PURPOSE OF ENABLING PHYSICIANS, PHYSICIAN ASSOCI-
 ATES AND NURSE PRACTITIONERS TO JOINTLY RENDER PROFESSIONAL HEALTH  CARE
 SERVICES.
   (B) IN A PROFESSIONAL CORPORATION, LICENSEES SHALL:
   (1)  HOLD  A  MAJORITY  OF  EACH  CLASS OF SHARES OF SUCH PROFESSIONAL
 CORPORATION THAT IS ENTITLED TO VOTE; AND
   (2) BE A MAJORITY OF THE DIRECTORS OF SUCH PROFESSIONAL CORPORATION.
   (C) AN INDIVIDUAL WHOM A PROFESSIONAL CORPORATION EMPLOYS, OR AN INDI-
 VIDUAL WHO OWNS AN INTEREST IN SUCH PROFESSIONAL CORPORATION, SHALL  NOT
 DIRECT  OR  CONTROL THE PROFESSIONAL JUDGMENT OF A LICENSEE WHO IS PRAC-
 TICING WITHIN SUCH PROFESSIONAL CORPORATION  AND  WITHIN  THE  SCOPE  OF
 PRACTICE PERMITTED UNDER SUCH LICENSEE'S LICENSE.
   (D)  A LICENSEE WHOM A PROFESSIONAL CORPORATION EMPLOYS, OR A LICENSEE
 WHO OWNS AN INTEREST IN SUCH PROFESSIONAL CORPORATION, SHALL NOT  DIRECT
 OR  CONTROL  THE  SERVICES  OF ANOTHER LICENSEE WHO IS PRACTICING WITHIN
 SUCH PROFESSIONAL CORPORATION UNLESS SUCH OTHER LICENSEE IS  ALSO  PRAC-
 TICING  WITHIN  THE  SCOPE  OF  PRACTICE PERMITTED UNDER SUCH LICENSEE'S
 LICENSE.
   (E)(1) EXCEPT AS PROVIDED IN SUBPARAGRAPH (2)  OF  THIS  PARAGRAPH,  A
 PROFESSIONAL  CORPORATION  SHALL NOT PROVIDE IN SUCH PROFESSIONAL CORPO-
 RATION'S ARTICLES OF INCORPORATION OR BYLAWS, OR BY MEANS OF A  CONTRACT
 OR  OTHER  AGREEMENT  OR  ARRANGEMENT, FOR REMOVING A DIRECTOR FROM SUCH
 PROFESSIONAL CORPORATION'S BOARD OF DIRECTORS, EXCEPT BY A MAJORITY VOTE
 OF THE SHAREHOLDERS OR, AS APPROPRIATE, A MAJORITY VOTE  OF  THE  DIREC-
 TORS.
 A. 9012                             4
 
   (2)  A  PROFESSIONAL  CORPORATION MAY REMOVE A DIRECTOR BY MEANS OTHER
 THAN A MAJORITY VOTE OF THE SHAREHOLDERS  OR  A  MAJORITY  VOTE  OF  THE
 DIRECTORS IF THE DIRECTOR THAT IS SUBJECT TO REMOVAL:
   (I)  VIOLATED  A DUTY OF CARE, A DUTY OF LOYALTY, OR ANOTHER FIDUCIARY
 DUTY TO SUCH PROFESSIONAL CORPORATION;
   (II) WAS THE SUBJECT OF A DISCIPLINARY PROCEEDING BY THE DEPARTMENT OF
 HEALTH, THE DEPARTMENT OF EDUCATION, OR THE STATE BOARD FOR MEDICINE, IN
 THIS STATE, OR SUCH EQUIVALENT ENTITY IN ANOTHER STATE,  IN  WHICH  SUCH
 DIRECTOR  OR  OFFICER'S  LICENSE TO PRACTICE MEDICINE IN THIS OR ANOTHER
 STATE WAS SUSPENDED OR REVOKED;
   (III) ENGAGED IN FRAUD, MISFEASANCE, OR MALFEASANCE  WITH  RESPECT  TO
 SUCH  DIRECTOR'S  PERFORMANCE OF DUTIES FOR OR ON BEHALF OF SUCH PROFES-
 SIONAL CORPORATION;
   (IV) RESIGNED, SEPARATED, OR WAS TERMINATED FROM EMPLOYMENT WITH  SUCH
 PROFESSIONAL CORPORATION; OR
   (V) FAILED TO MEET STANDARDS OR CRITERIA SUCH PROFESSIONAL CORPORATION
 ESTABLISHED FOR A POSITION AS A DIRECTOR.
   (F) A PROFESSIONAL CORPORATION MAY RELINQUISH OR TRANSFER CONTROL OVER
 SUCH  PROFESSIONAL  CORPORATION'S  ADMINISTRATIVE, BUSINESS, OR CLINICAL
 OPERATIONS ONLY IF SUCH PROFESSIONAL CORPORATION EXECUTES A  SHAREHOLDER
 AGREEMENT EXCLUSIVELY BETWEEN OR AMONG AND FOR THE BENEFIT OF A MAJORITY
 OF  SHAREHOLDERS  AND  SUCH  SHAREHOLDER  AGREEMENT  COMPLIES  WITH  THE
 PROVISIONS OF ARTICLE SIX OF THE BUSINESS CORPORATION LAW.
   (G) A PROFESSIONAL CORPORATION WHICH IS SUBJECT  TO  SECTION  FOURTEEN
 HUNDRED  SIX-A  OF  THIS  ARTICLE  MAY  ELECT  TO BECOME SUBJECT TO THIS
 SECTION BY AMENDING SUCH PROFESSIONAL CORPORATION'S ARTICLES OF INCORPO-
 RATION OR BYLAWS.
   (H) A PROFESSIONAL CORPORATION OR MEDICAL SERVICES  CORPORATION  SHALL
 NOT  TAKE  ANY  RETALIATORY  ACTION, AS DEFINED BY SECTION SEVEN HUNDRED
 FORTY OF THE LABOR LAW, AGAINST A MEDICAL LICENSEE AS  RETALIATION  FOR,
 OR  AS A CONSEQUENCE OF, SUCH MEDICAL LICENSEE'S VIOLATION OF A NON-DIS-
 CLOSURE AGREEMENT OR NON-DISPARAGEMENT AGREEMENT OR BECAUSE SUCH MEDICAL
 LICENSEE, IN GOOD FAITH, DISCLOSED OR  REPORTED  INFORMATION  THAT  SUCH
 MEDICAL  LICENSEE  BELIEVES  IS  EVIDENCE OF A VIOLATION OF A FEDERAL OR
 STATE LAW, RULE OR REGULATION TO:
   (1) THE MANAGEMENT SERVICES ORGANIZATION;
   (2) A HOSPITAL, AS DEFINED IN SECTION TWENTY-EIGHT HUNDRED ONE OF  THE
 PUBLIC HEALTH LAW; OR
   (3) A STATE OR FEDERAL AUTHORITY.
   §  2.  The  business  corporation  law  is  amended  by adding two new
 sections 1517 and 1518 to read as follows:
 § 1517. PROFESSIONAL CORPORATIONS; MEDICINE.
   (A) AS USED IN THIS  SECTION,  THE  FOLLOWING  TERMS  SHALL  HAVE  THE
 FOLLOWING MEANINGS:
   (1) "PROFESSIONAL CORPORATION" MEANS A PROFESSIONAL CORPORATION ORGAN-
 IZED FOR THE PURPOSE OF PRACTICING MEDICINE.
   (2)  "PRACTICE OF MEDICINE", "PRACTICING MEDICINE" OR ANY VARIATION OF
 SUCH TERM SHALL HAVE THE SAME MEANING AS THE TERM "PRACTICE OF MEDICINE"
 IS DEFINED BY SECTION SIXTY-FIVE HUNDRED  TWENTY-TWO  OF  THE  EDUCATION
 LAW.
   (B) (1) IN A PROFESSIONAL CORPORATION:
   (I)  PHYSICIANS  WHO  ARE  LICENSED IN THIS STATE TO PRACTICE MEDICINE
 SHALL HOLD THE MAJORITY OF EACH CLASS OF SHARES  THAT  ARE  ENTITLED  TO
 VOTE;
   (II)  PHYSICIANS  WHO  ARE LICENSED IN THIS STATE TO PRACTICE MEDICINE
 SHALL BE A MAJORITY OF THE DIRECTORS; AND
 A. 9012                             5
 
   (III) ALL OFFICERS, EXCEPT THE SECRETARY AND TREASURER, IF ANY,  SHALL
 BE  PHYSICIANS  WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDICINE. THE
 SAME PERSON MAY HOLD ANY TWO OR MORE OFFICES.
   (2)  EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT OF HEALTH MAY
 EXPRESSLY REQUIRE THAT PHYSICIANS WHO ARE  LICENSED  IN  THIS  STATE  TO
 PRACTICE MEDICINE HOLD MORE THAN A MAJORITY OF EACH CLASS OF SHARES THAT
 IS ENTITLED TO VOTE.
   (3)  EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT OF HEALTH MAY
 EXPRESSLY REQUIRE THAT PHYSICIANS WHO ARE  LICENSED  IN  THIS  STATE  TO
 PRACTICE MEDICINE BE MORE THAN A MAJORITY OF THE DIRECTORS.
   (C) A CORPORATION WHICH IS NOT ORGANIZED FOR THE PURPOSE OF PRACTICING
 MEDICINE  MAY  BE A SHAREHOLDER OF A PROFESSIONAL CORPORATION SOLELY FOR
 THE PURPOSE OF EFFECTING A REORGANIZATION AS DEFINED BY 26 USC 368.
   (D)(1) EXCEPT AS PROVIDED IN SUBPARAGRAPH (2)  OF  THIS  PARAGRAPH,  A
 PROFESSIONAL  CORPORATION  SHALL NOT PROVIDE IN SUCH PROFESSIONAL CORPO-
 RATION'S ARTICLES OF INCORPORATION OR BYLAWS, OR BY MEANS OF A  CONTRACT
 OR OTHER AGREEMENT OR ARRANGEMENT, FOR REMOVING A DIRECTOR, APPOINTED IN
 ACCORDANCE  WITH SUBPARAGRAPH (1) OF PARAGRAPH (B) OF THIS SECTION, FROM
 SUCH PROFESSIONAL CORPORATION'S  BOARD  OF  DIRECTORS,  OR  AN  OFFICER,
 APPOINTED  IN  ACCORDANCE WITH SUBPARAGRAPH (1) OF PARAGRAPH (B) OF THIS
 SECTION, FROM AN OFFICE OF SUCH PROFESSIONAL CORPORATION,  EXCEPT  BY  A
 MAJORITY VOTE OF THE SHAREHOLDERS OR, AS APPROPRIATE, A MAJORITY VOTE OF
 THE DIRECTORS.
   (2)  A  PROFESSIONAL  CORPORATION  MAY REMOVE A DIRECTOR OR OFFICER BY
 MEANS OTHER THAN A MAJORITY VOTE OF THE SHAREHOLDERS OR A MAJORITY  VOTE
 OF  THE  DIRECTORS  IF  SUCH  DIRECTOR  OR  OFFICER  WHICH IS SUBJECT TO
 REMOVAL:
   (I) VIOLATED A DUTY OF CARE, A DUTY OF LOYALTY, OR  ANOTHER  FIDUCIARY
 DUTY TO SUCH PROFESSIONAL CORPORATION;
   (II) WAS THE SUBJECT OF A DISCIPLINARY PROCEEDING BY THE DEPARTMENT OF
 HEALTH, THE DEPARTMENT OF EDUCATION, OR THE STATE BOARD FOR MEDICINE, IN
 THIS  STATE,  OR  SUCH EQUIVALENT ENTITY IN ANOTHER STATE, IN WHICH SUCH
 DIRECTOR OR OFFICER'S LICENSE TO PRACTICE MEDICINE IN  THIS  OR  ANOTHER
 STATE WAS SUSPENDED OR REVOKED;
   (III)  ENGAGED  IN  FRAUD, MISFEASANCE, OR MALFEASANCE WITH RESPECT TO
 SUCH DIRECTOR OR OFFICER'S PERFORMANCE OF DUTIES FOR  OR  ON  BEHALF  OF
 SUCH PROFESSIONAL CORPORATION;
   (IV)  RESIGNED, SEPARATED, OR WAS TERMINATED FROM EMPLOYMENT WITH SUCH
 PROFESSIONAL CORPORATION; OR
   (V) FAILED TO MEET STANDARDS OR CRITERIA SUCH PROFESSIONAL CORPORATION
 ESTABLISHED FOR A POSITION AS A DIRECTOR OR OFFICER.
   (E) A PROFESSIONAL CORPORATION MAY RELINQUISH OR TRANSFER CONTROL OVER
 SUCH PROFESSIONAL CORPORATION'S ADMINISTRATIVE,  BUSINESS,  OR  CLINICAL
 OPERATIONS  ONLY IF SUCH PROFESSIONAL CORPORATION EXECUTES A SHAREHOLDER
 AGREEMENT EXCLUSIVELY BETWEEN OR AMONG AND FOR THE BENEFIT OF A MAJORITY
 OF SHAREHOLDERS WHO ARE PHYSICIANS LICENSED IN THIS  STATE  TO  PRACTICE
 MEDICINE  AND  THE SHAREHOLDER AGREEMENT COMPLIES WITH THE PROVISIONS OF
 ARTICLE SIX OF THIS CHAPTER.
   (F)(1) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO:
   (I) A NONPROFIT CORPORATION WHICH IS ORGANIZED UNDER THE LAWS OF  THIS
 STATE  TO PROVIDE MEDICAL SERVICES TO MIGRANT, RURAL, HOMELESS, OR OTHER
 MEDICALLY UNDERSERVED POPULATIONS UNDER 42  USC  254B  OR  254C,  AS  IN
 EFFECT ON THE EFFECTIVE DATE OF THIS SECTION;
   (II)  A  FEDERALLY-QUALIFIED  HEALTH  CENTER,  AS  DEFINED  BY  42 USC
 1396D(I), AS IN EFFECT ON THE EFFECTIVE  DATE  OF  THIS  SECTION,  WHICH
 OPERATES IN COMPLIANCE WITH OTHER APPLICABLE STATE OR FEDERAL LAW; OR
 A. 9012                             6
 
   (III)  EXCEPT  AS  PROVIDED  IN  SUBPARAGRAPH (2) OF THIS PARAGRAPH, A
 FOR-PROFIT OR NONPROFIT BUSINESS ENTITY WHICH IS INCORPORATED OR  ORGAN-
 IZED  UNDER  THE LAWS OF THIS STATE, WHICH PROVIDES THE ENTIRETY OF SUCH
 BUSINESS ENTITY'S MEDICAL SERVICES THROUGH  ONE  OR  MORE  RURAL  HEALTH
 CLINICS,  AS DEFINED IN 42 USC 1395X, AS IN EFFECT ON THE EFFECTIVE DATE
 OF THIS SECTION, AND WHICH OPERATES IN COMPLIANCE WITH STATE AND FEDERAL
 LAWS THAT APPLY TO RURAL HEALTH CLINICS.
   (2) A BUSINESS ENTITY IS EXEMPT UNDER THIS SUBSECTION FOR A PERIOD  OF
 UP  TO  ONE  YEAR  AFTER SUCH BUSINESS ENTITY ESTABLISHES A RURAL HEALTH
 CLINIC, EVEN THOUGH SUCH RURAL HEALTH CLINIC WHICH SUCH BUSINESS  ENTITY
 ESTABLISHES  DOES  NOT  MEET  ALL  OF THE ELEMENTS OF THE DEFINITION SET
 FORTH IN 42 USC 1395X, AS IN  EFFECT  ON  THE  EFFECTIVE  DATE  OF  THIS
 SECTION,  IF DURING SUCH ONE-YEAR PERIOD AN APPLICABLE CERTIFICATION FOR
 SUCH RURAL HEALTH CLINIC IS PENDING.
   (G) A PROFESSIONAL CORPORATION OR MEDICAL SERVICES  CORPORATION  SHALL
 NOT  TAKE  ANY  RETALIATORY  ACTION, AS DEFINED BY SECTION SEVEN HUNDRED
 FORTY OF THE LABOR LAW, AGAINST A MEDICAL LICENSEE AS  RETALIATION  FOR,
 OR  AS  A CONSEQUENCE OF, SUCH MEDICAL LICENSEE'S VIOLATION OF A NONDIS-
 CLOSURE AGREEMENT OR NON-DISPARAGEMENT AGREEMENT OR BECAUSE SUCH MEDICAL
 LICENSEE, IN GOOD FAITH, DISCLOSED OR  REPORTED  INFORMATION  THAT  SUCH
 MEDICAL  LICENSEE  BELIEVES  IS  EVIDENCE OF A VIOLATION OF A FEDERAL OR
 STATE LAW, RULE OR REGULATION TO:
   (1) THE MANAGEMENT SERVICES ORGANIZATION;
   (2) A HOSPITAL, AS DEFINED IN SECTION TWENTY-EIGHT HUNDRED ONE OF  THE
 PUBLIC HEALTH LAW; OR
   (3) A STATE OR FEDERAL AUTHORITY.
 § 1518. PROFESSIONAL CORPORATIONS; HEALTH CARE SERVICES.
   (A)  AS  USED  IN  THIS  SECTION,  THE  FOLLOWING TERMS SHALL HAVE THE
 FOLLOWING MEANINGS:
   (1) "LICENSEE" MEANS AN INDIVIDUAL WHO HAS A LICENSE AS A PHYSICIAN OR
 A LICENSE AS A PHYSICIAN ASSOCIATE FROM THE STATE BOARD FOR MEDICINE  OR
 THE DEPARTMENT OF EDUCATION OR WHO HAS A LICENSE AS A NURSE PRACTITIONER
 FROM THE STATE BOARD FOR NURSING OR THE DEPARTMENT OF EDUCATION.
   (2)  "PROFESSIONAL  CORPORATION" MEANS A PROFESSIONAL CORPORATION THAT
 IS ORGANIZED FOR THE PURPOSE OF ENABLING PHYSICIANS,  PHYSICIAN  ASSOCI-
 ATES  AND NURSE PRACTITIONERS TO JOINTLY RENDER PROFESSIONAL HEALTH CARE
 SERVICES.
   (B) IN A PROFESSIONAL CORPORATION, LICENSEES SHALL:
   (1) HOLD A MAJORITY OF EACH  CLASS  OF  SHARES  OF  SUCH  PROFESSIONAL
 CORPORATION WHICH IS ENTITLED TO VOTE; AND
   (2) BE A MAJORITY OF THE DIRECTORS OF SUCH PROFESSIONAL CORPORATION.
   (C) AN INDIVIDUAL WHOM A PROFESSIONAL CORPORATION EMPLOYS, OR AN INDI-
 VIDUAL  WHO OWNS AN INTEREST IN SUCH PROFESSIONAL CORPORATION, SHALL NOT
 DIRECT OR CONTROL THE PROFESSIONAL JUDGMENT OF A LICENSEE WHO  IS  PRAC-
 TICING  WITHIN  SUCH  PROFESSIONAL  CORPORATION  AND WITHIN THE SCOPE OF
 PRACTICE PERMITTED UNDER SUCH LICENSEE'S LICENSE.
   (D) A LICENSEE WHOM A PROFESSIONAL CORPORATION EMPLOYS, OR A  LICENSEE
 WHO  OWNS AN INTEREST IN SUCH PROFESSIONAL CORPORATION, SHALL NOT DIRECT
 OR CONTROL THE SERVICES OF ANOTHER LICENSEE  WHO  IS  PRACTICING  WITHIN
 SUCH PROFESSIONAL CORPORATION UNLESS THE OTHER LICENSEE IS ALSO PRACTIC-
 ING  WITHIN  THE  SCOPE  OF  PRACTICE  PERMITTED  UNDER  SUCH LICENSEE'S
 LICENSE.
   (E)(1) EXCEPT AS PROVIDED IN SUBPARAGRAPH (2)  OF  THIS  PARAGRAPH,  A
 PROFESSIONAL  CORPORATION  SHALL NOT PROVIDE IN SUCH PROFESSIONAL CORPO-
 RATION'S ARTICLES OF INCORPORATION OR BYLAWS, OR BY MEANS OF A  CONTRACT
 OR  OTHER  AGREEMENT  OR  ARRANGEMENT, FOR REMOVING A DIRECTOR FROM SUCH
 A. 9012                             7
 
 PROFESSIONAL CORPORATION'S BOARD OF DIRECTORS, EXCEPT BY A MAJORITY VOTE
 OF THE SHAREHOLDERS OR, AS APPROPRIATE, A MAJORITY VOTE  OF  THE  DIREC-
 TORS.
   (2)  A  PROFESSIONAL  CORPORATION MAY REMOVE A DIRECTOR BY MEANS OTHER
 THAN A MAJORITY VOTE OF THE SHAREHOLDERS  OR  A  MAJORITY  VOTE  OF  THE
 DIRECTORS IF SUCH DIRECTOR THAT IS SUBJECT TO REMOVAL:
   (I)  VIOLATED  A DUTY OF CARE, A DUTY OF LOYALTY, OR ANOTHER FIDUCIARY
 DUTY TO SUCH PROFESSIONAL CORPORATION;
   (II) WAS THE SUBJECT OF A DISCIPLINARY PROCEEDING BY THE DEPARTMENT OF
 HEALTH, THE DEPARTMENT OF EDUCATION, OR THE STATE BOARD FOR MEDICINE, IN
 THIS STATE, OR SUCH EQUIVALENT ENTITY IN ANOTHER STATE,  IN  WHICH  SUCH
 DIRECTOR  OR  OFFICER'S  LICENSE TO PRACTICE MEDICINE IN THIS OR ANOTHER
 STATE WAS SUSPENDED OR REVOKED;
   (III) ENGAGED IN FRAUD, MISFEASANCE, OR MALFEASANCE  WITH  RESPECT  TO
 SUCH  DIRECTOR'S  PERFORMANCE OF DUTIES FOR OR ON BEHALF OF SUCH PROFES-
 SIONAL CORPORATION;
   (IV) RESIGNED, SEPARATED, OR WAS TERMINATED FROM EMPLOYMENT WITH  SUCH
 PROFESSIONAL CORPORATION; OR
   (V) FAILED TO MEET STANDARDS OR CRITERIA SUCH PROFESSIONAL CORPORATION
 ESTABLISHED FOR A POSITION AS A DIRECTOR.
   (F) A PROFESSIONAL CORPORATION MAY RELINQUISH OR TRANSFER CONTROL OVER
 SUCH  PROFESSIONAL  CORPORATION'S  ADMINISTRATIVE, BUSINESS, OR CLINICAL
 OPERATIONS ONLY IF SUCH PROFESSIONAL CORPORATION EXECUTES A  SHAREHOLDER
 AGREEMENT EXCLUSIVELY BETWEEN OR AMONG AND FOR THE BENEFIT OF A MAJORITY
 OF  SHAREHOLDERS  AND  SUCH  SHAREHOLDER  AGREEMENT  COMPLIES  WITH  THE
 PROVISIONS OF ARTICLE SIX OF THIS CHAPTER.
   (G) A PROFESSIONAL CORPORATION WHICH IS  SUBJECT  TO  SECTION  FIFTEEN
 HUNDRED  SEVENTEEN  OF  THIS ARTICLE MAY ELECT TO BECOME SUBJECT TO THIS
 SECTION BY AMENDING SUCH PROFESSIONAL CORPORATION'S ARTICLES OF INCORPO-
 RATION OR BYLAWS.
   (H) A PROFESSIONAL CORPORATION OR MEDICAL SERVICES  CORPORATION  SHALL
 NOT  TAKE  ANY  RETALIATORY  ACTION, AS DEFINED BY SECTION SEVEN HUNDRED
 FORTY OF THE LABOR LAW, AGAINST A MEDICAL LICENSEE AS  RETALIATION  FOR,
 OR  AS  A CONSEQUENCE OF, SUCH MEDICAL LICENSEE'S VIOLATION OF A NONDIS-
 CLOSURE AGREEMENT OR NON-DISPARAGEMENT AGREEMENT OR BECAUSE SUCH MEDICAL
 LICENSEE, IN GOOD FAITH, DISCLOSED OR  REPORTED  INFORMATION  THAT  SUCH
 MEDICAL  LICENSEE  BELIEVES  IS  EVIDENCE OF A VIOLATION OF A FEDERAL OR
 STATE LAW, RULE OR REGULATION TO:
   (1) THE MANAGEMENT SERVICES ORGANIZATION;
   (2) A HOSPITAL, AS DEFINED IN SECTION TWENTY-EIGHT HUNDRED ONE OF  THE
 PUBLIC HEALTH LAW; OR
   (3) A STATE OR FEDERAL AUTHORITY.
   § 3. Section 1508 of the business corporation law is amended by adding
 a new paragraph (d) to read as follows:
   (D)  THE DIRECTORS AND OFFICERS OF ANY PROFESSIONAL CORPORATION ESTAB-
 LISHED FOR THE PURPOSE OF PRACTICING MEDICINE  MAY  INCLUDE  INDIVIDUALS
 WHO ARE NOT LICENSED TO PRACTICE MEDICINE IN ANY STATE, PROVIDED HOWEVER
 THAT  AT LEAST A SIMPLE MAJORITY OF EACH CLASS OF SHARES WHICH ARE ENTI-
 TLED TO VOTING RIGHTS OF SUCH CORPORATION, AS WELL AS THE PRESIDENT, THE
 CHAIRPERSON OF THE BOARD OF DIRECTORS, AND THE CHIEF  EXECUTIVE  OFFICER
 OR  OFFICERS,  EXCEPT THE SECRETARY OR TREASURER, IF ANY, ARE AUTHORIZED
 BY LAW TO PRACTICE MEDICINE IN THIS STATE, AND ARE  EITHER  SHAREHOLDERS
 OF  SUCH  CORPORATION  OR  ENGAGED  IN  THE PRACTICE OF MEDICINE IN SUCH
 CORPORATION.
   § 4. Section 2801 of the public health law is amended by adding a  new
 subdivision 15 to read as follows:
 A. 9012                             8
 
   15.  "PROFESSIONAL  CORPORATION"  MEANS  A PROFESSIONAL CORPORATION OR
 PARTNERSHIP ORGANIZED FOR THE PURPOSE OF PRACTICING MEDICINE.
   §  5.  Subdivision  4  of  section  2801-a of the public health law is
 amended by adding a new paragraph (e-1) to read as follows:
   (E-1) (I) NO HOSPITAL SHALL BE APPROVED FOR ESTABLISHMENT WHICH  WOULD
 BE OPERATED BY A PROFESSIONAL CORPORATION UNLESS:
   (A)  PHYSICIANS  WHO  ARE  LICENSED IN THIS STATE TO PRACTICE MEDICINE
 HOLD THE MAJORITY OF EACH CLASS OF SHARES WHICH ARE ENTITLED TO VOTE;
   (B) PHYSICIANS WHO ARE LICENSED IN THIS  STATE  TO  PRACTICE  MEDICINE
 CONSTITUTE A MAJORITY OF THE DIRECTORS; AND
   (C)  ALL  OFFICERS,  EXCEPT  THE  SECRETARY AND TREASURER, IF ANY, ARE
 PHYSICIANS WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDICINE. THE SAME
 PERSON MAY HOLD ANY TWO OR MORE OFFICES.
   (II) EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT MAY EXPRESSLY
 REQUIRE THAT PHYSICIANS WHO ARE LICENSED IN THIS STATE TO PRACTICE MEDI-
 CINE HOLD MORE THAN A MAJORITY OF EACH CLASS OF SHARES THAT IS  ENTITLED
 TO VOTE.
   (III) EXCEPT AS OTHERWISE PROVIDED BY LAW, THE DEPARTMENT MAY EXPRESS-
 LY  REQUIRE  THAT  PHYSICIANS WHO ARE LICENSED IN THIS STATE TO PRACTICE
 MEDICINE BE MORE THAN A MAJORITY OF THE DIRECTORS.
   § 6. This act shall take effect immediately.