1. The Laws of New York
  2. Consolidated Laws
  3. Not-For-Profit Corporation
  4. Article 7: Directors and Officers


Section 719 Liability of directors in certain cases

Not-For-Profit Corporation (NPC)

  (a) Directors of a corporation who vote for or concur in any of the following corporate actions shall be jointly and severally liable to the corporation for the benefit of its creditors or members or the ultimate beneficiaries of its activities, to the extent of any injury suffered by such persons, respectively, as a result of such action, or, if there be no creditors or members or ultimate beneficiaries so injured, to the corporation, to the extent of any injury suffered by the corporation as a result of such action:

  (1) The distribution of the corporation's cash or property to members, directors or officers, other than a distribution permitted under section 515 (Dividends prohibited; certain distributions of cash or property authorized).

  (2) The redemption of capital certificates, subvention certificates or bonds, to the extent such redemption is contrary to the provisions of section 502 (Member's capital contributions), section 504 (Subventions), or section 506 (Bonds and security interests).

  (3) The payment of a fixed or contingent periodic sum to the holders of subvention certificates or of interest to the holders or beneficiaries of bonds to the extent such payment is contrary to the provisions of section 504 or section 506.

  (4) The distribution of assets in violation of section 1002-a (Carrying out the plan of dissolution and distribution of assets) or without paying or adequately providing for all known liabilities of the corporation, excluding any claims not filed by creditors within the time limit set in a notice given to creditors under articles 10 (Non-judicial dissolution) or 11 (Judicial dissolution).

  (5) The making of any loan contrary to section 716 (Loans to directors and officers).

  (b) A director who is present at a meeting of the board, or any committee thereof, at which action specified in paragraph (a) is taken shall be presumed to have concurred in the action unless his dissent thereto shall be entered in the minutes of the meeting, or unless he shall submit his written dissent to the person acting as the secretary of the meeting before the adjournment thereof, or shall deliver or send by registered mail such dissent to the secretary of the corporation promptly after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. A director who is absent from a meeting of the board, or any committee thereof, at which such action is taken shall be presumed to have concurred in the action unless he shall deliver or send by registered mail his dissent thereto to the secretary of the corporation or shall cause such dissent to be filed with the minutes of the proceedings of the board or committee within a reasonable time after learning of such action.

  (c) Any director against whom a claim is successfully asserted under this section shall be entitled to contribution from the other directors who voted for or concurred in the action upon which the claim is asserted.

  (d) Directors against whom a claim is successfully asserted under this section shall be entitled, to the extent of the amounts paid by them to the corporation as a result of such claims:

  (1) Upon reimbursement to the corporation of any amount of an improper distribution of the corporation's cash or property, to be subrogated to the rights of the corporation against members, directors or officers who received such distribution with knowledge of facts indicating that it was not authorized by this chapter, in proportion to the amounts received by them respectively.

  (2) Upon reimbursement to the corporation of an amount representing an improper redemption of a capital certificate, subvention or bond, to have the corporation rescind such improper redemption and recover the amount paid, for their benefit but at their expense, from any member or holder who received such payment with knowledge of facts indicating that such redemption by the corporation was not authorized by this chapter.

  (3) Upon reimbursement to the corporation of an amount representing all or part of an improper payment of a fixed or contingent periodic sum to the holder of a subvention certificate, or of interest to the holder or beneficiary of a bond, to have the corporation recover the amount so paid, for their benefit but at their expense, from any holder or beneficiary who received such payment with knowledge of facts indicating that such payment by the corporation was not authorized by this chapter.

  (4) Upon payment to the corporation of the claim of the attorney general or of any creditor by reason of a violation of subparagraph (a) (4), to be subrogated to the rights of the corporation against any person who received an improper distribution of assets.

  (5) Upon reimbursement to the corporation of the amount of any loan made contrary to section 716 (Loans to directors and officers), to be subrogated to the rights of the corporation against a director or officer who received the improper loan.

  (e) A director or officer shall not be liable under this section if, in the circumstances, he discharged his duty to the corporation under section 717 (Duty of directors and officers).

  (f) This section shall not affect any liability otherwise imposed by law upon any director or officer.