New York State Assembly

 
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A06940 Summary:

A06940 Actions:

A06940 Committee Votes:

Committee:CORPORATIONS, AUTHORITIES AND COMMISSIONS   Chair:Zebrowski      
DATE:05/23/2023AYE/NAY:25/0  Action: Favorable refer to committee Rules        
Zebrowski
Aye
Lemondes
Aye
Cook
Absent
Blankenbush
Aye
Otis
Aye
Friend
Aye
Rozic
Aye
Palmesano
Aye
Kim
Aye
Angelino
Aye
Dilan
Aye
Jensen
Aye
Pheffer Amato
Aye
Curran
Aye
Vanel
Aye
Pirozzolo
Aye
Carroll
Aye
Fall
Aye
Jean-Pierre
Aye
Gonzalez-Rojas
Aye
Zinerman
Aye
Tapia
Aye
Jacobson
Aye
Bores
Aye
Shimsky
Aye
Simone
Aye

Committee:RULES   Chair:Pretlow      
DATE:05/24/2023AYE/NAY:20/8  Action: Favorable         
Heastie
Excused
Barclay
Nay
Weinstein
Aye
Hawley
Excused
Pretlow
Aye
Giglio
Nay
Cook
Aye
Blankenbush
Nay
Glick
Aye
Norris
Nay
Aubry
Aye
Ra
Nay
Dinowitz
Aye
Brabenec
Nay
Colton
Aye
Palmesano
Nay
Magnarelli
Aye
Reilly
Nay
Paulin
Aye
Peoples-Stokes
Aye
Benedetto
Aye
Lavine
Aye
Lupardo
Aye
Zebrowski
Aye
Thiele
Aye
Braunstein
Excused
Dickens
Aye
Davila
Aye
Hyndman
Aye
Rozic
Aye
Bronson
Aye

A06940 Floor Votes:

A06940 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
 submitted in accordance with Assembly Rule III, Sec 1(f)



 
BILL NUMBER: A6940
 
SPONSOR: Simone

 
TITLE OF BILL:
 
An act to amend the not-for-profit corporation law, in relation to
authorizing non-membership not-for-profit corporations to classify board
of directors in the by-laws
 
 
PURPOSE:
 
The purpose of this bill is to authorize non-membership not-for-profit
corporations to classify their boards through their by-laws
 
 
SUMMARY OF SPECIFIC PROVISIONS:
 
Section 1. Amends Paragraph (a) of section 704 of the not-for-profit
Corporation law to remove the clause adopted by the members.
 
Section 2 sets forth the effective date.
 
 
JUSTIFICATION:
 
Current not-for-profit corporations law (N-PCL) Section 704 outlines the
classification of directors, or the process of staggering the terms of
board members such that their terms of service do not all begin and
expire at the same time. While this is a critical practice for institu-
tional knowledge and organizational stability, Section 704(a) provides
that an organization with a board elected by the directors, i.e., a
non-membership organization, may only adopt a classified board structure
where the certificate of incorporation so authorize.  Membership organ-
izations, on the other hand, may authorize board classification via a
by-law adopted by the members under the current law.
 
In order to be in compliance with this requirement, non-member organiza-
tions must either anticipate such growth at the outset as they put their
charter documentation in place or amend their certificate of incorpo-
ration later in their life cycle in advance of implementing the prac-
tice. A common practice for organizations adopting a classified board
later in their life cycle is to record the authority in their by-laws.
Under the present law, however, organizations that follow this common
practice are operating with invalidly composed boards, threatening the
authority of their board and therefore calling into question corporate
decisions.
 
The current classification of directors' structure under Section 704 of
the NPCL is likely a carryover from the Business Corporation Law, which
requires corporations to have shareholders (akin to members).  Unlike
for-profit business corporations, not-for-profits do not have sharehold-
ers and many organizations are non-member entities that would benefit
from the ability to classify their boards through a by-law
 
To address this concern, N-PCL,704(a) should be revised to strike the
language 'adopted by the members.'
 
 
PRIOR LEGISLATIVE HISTORY:
 
This is new bill.
 
 
FISCAL IMPLICATIONS:
 
None.
 
 
EFFECTIVE DATE:
This act shall take effect immediately.

A06940 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          6940
 
                               2023-2024 Regular Sessions
 
                   IN ASSEMBLY
 
                                       May 9, 2023
                                       ___________
 
        Introduced  by  M.  of A. SIMONE, ZEBROWSKI -- read once and referred to
          the Committee on Corporations, Authorities and Commissions
 
        AN ACT to amend the  not-for-profit  corporation  law,  in  relation  to
          authorizing  non-membership  not-for-profit  corporations  to classify
          board of directors in the by-laws

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  Paragraph (a) of section 704 of the not-for-profit corpo-
     2  ration law, as amended by chapter 847 of the laws of 1970, is amended to
     3  read as follows:
     4    (a) The certificate of incorporation  or  a  by-law  [adopted  by  the
     5  members]  may provide that directors elected or appointed at large shall
     6  be divided into either two, three, four or five classes for the  purpose
     7  of  staggering  their terms of office and that all or some of the direc-
     8  tors elected or appointed otherwise than at large shall be divided  into
     9  the  same  or a different number of classes, not exceeding five, for the
    10  same purpose. All classes of each type  shall  be  as  nearly  equal  in
    11  number as possible and, if provision has been made for cumulative voting
    12  under  section 617 (Cumulative voting), no class shall include less than
    13  three directors.
    14    § 2. This act shall take effect immediately.
 
 
 
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10109-01-3