§ 31.22 Approval of certain certificates of incorporation or articles of

organization; granting of operating certificates.

(a) No certificate of incorporation of a business or not-for-profit
corporation, or articles of organization of a limited liability company,
shall hereafter be filed which includes among its corporate purposes or
powers the establishment or operation of a facility for which an
operating certificate is required by this article from the commissioner
of the office of mental health or the solicitation of contributions for
any such purpose, except with the written approval of the commissioner
and, when otherwise required by law, the approval of a justice of the
supreme court endorsed on or annexed to the certificate of
incorporation.

(b) An application for approval of the proposed certificate of
incorporation or articles of organization shall be filed with the
commissioner together with such other forms and information as shall be
prescribed by, or acceptable to, the commissioner.

The commissioner shall not approve a certificate of incorporation or
articles of organization or grant an operating certificate unless he is
satisfied, insofar as applicable, as to (1) the public need for the
services or the facility which the proposed corporation or proposed
provider of services is empowered to perform or maintain at the time and
place and under the circumstances proposed; (2) the character,
competence and standing in the community of the proposed incorporators,
directors, sponsors, stockholders, members, managers, partners, or
operators, provided that in making such determination the commissioner
is authorized to consider whether or not, within ten years of the date
of the application, any such persons have been denied renewal for cause
of an operating certificate, or have had an operating certificate
revoked or suspended for cause, and such denial, revocation or
suspension was not reversed after an administrative hearing or other
appeal, for a program or facility licensed or operated by a health,
mental hygiene, social services or education agency or department of
this or any state or have failed to operate a program serving the
mentally disabled, other disabled persons as defined in subdivision
twenty-one of section two hundred ninety-two of the executive law, the
aged, children or other persons receiving health, mental hygiene,
residential, social or educational services in continuous compliance
with applicable laws or regulations within the previous ten years in any
state; (3) the financial resources of the proposed corporation or
proposed provider of services and its sources of future revenues; (4)
the availability of facilities or services which may serve as alternates
or substitutes for the facility or services which the proposed
corporation or proposed provider of services is empowered to maintain or
render; (5) such other matters as he shall deem pertinent in the public
interest. The commissioner in approving the proposed certificate of
incorporation or articles of organization or issuing the proposed
operating certificate may request and consider information and advice
from all available sources including local and regional mental health
and health planning agencies and groups as to the matters set forth
herein. If the commissioner proposes to disapprove the application he
shall afford the applicant an opportunity to request a public hearing.
The commissioner shall not take any action contrary to the advice of the
health systems agency for facilities other than community residences or
residential care centers for adults until he affords an opportunity to
the agency to request a public hearing and, if so requested, a public
hearing shall be held. The commissioner, on his own motion, may hold a
public hearing on the application. Any public hearings held pursuant to
this subdivision may be conducted by the commissioner or by an
individual designated by the commissioner.

(c) (1) Any change in the person or entity which is the holder of an
operating certificate of a facility for which an operating certificate
has been issued pursuant to this article shall be approved by the
commissioner in accordance with the provisions of this subdivision and
subdivisions (a) and (b) of this section, except that: (i) any such
change shall be subject to approval by the commissioner in accordance
with paragraph two of subdivision (b) of this section only with respect
to the new person or entity, and any remaining persons or entities who
have not been previously approved for that facility in accordance with
such paragraph; and (ii) any such change shall not be subject to
paragraph one of subdivision (b) of this section.

(2) Any transfer, assignment or other disposition of ten percent or
more of the stock, membership interest or voting rights thereunder of a
corporation or a limited liability company which is the holder of an
operating certificate for a facility providing mental hygiene services
or any transfer, assignment or other disposition of the stock or voting
rights thereunder of such a corporation which results in the ownership
or control of more than ten percent of the stock, ownership or voting
rights thereunder of such corporation or limited liability company by
any person shall be subject to approval by the commissioner in
accordance with the provisions of this subdivision and subdivisions (a)
and (b) of this section and rules and regulations promulgated pursuant
thereto. In the absence of such approval, the operating certificate of
such facility shall be subject to revocation or suspension, except that:
(i) any such transaction shall be subject to approval by the
commissioner in accordance with paragraph two of subdivision (b) of this
section only with respect to a new stockholder, member or a new
principal stockholder; and (ii) any such transaction shall not be
subject to paragraph one of subdivision (b) of this section.

(3) No operating certificate shall be issued for a facility which
would be operated by any partnership or limited liability company, any
of the members of which are not natural persons.

(4) No operating certificate shall be issued for a facility which
would be operated by a corporation any of the stock of which is owned by
another corporation or a limited liability company any of the stock of
which is owned by another corporation.

(d) Where the approval required by subdivision (a) of this section has
not been obtained, the commissioner may institute and maintain an action
in the supreme court through the attorney general to procure a judgment
dissolving and vacating or annulling (1) the certificate of
incorporation of any such corporation or articles of organization of any
such limited liability company, or (2) the certificate of incorporation
of any corporation or articles of organization of any such limited
liability company hereafter incorporated or formed, the name, purposes,
objectives, or activities of which in any manner may reasonably lead to
the belief that the corporation or limited liability company possesses
or may exercise any of such purposes.