NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A213
SPONSOR: Paulin TITLE OF BILL:
An act to amend the not-for-profit corporation law, in relation to
voting requirements of the board of certain corporations
PURPOSE OR GENERAL IDEA OF BILL:
To require a two-thirds majority vote of the directors present at the
time of the vote, if a quorum is present at that time, for a proposed
merger, consolidation, or dissolution of the corporation.
SUMMARY OF SPECIFIC PROVISIONS:
Section one of the bill amends the opening paragraph of paragraph a of
section 902 of the not-for-profit corporation law to require that the
board of a corporation proposing to participate in a merger or consol-
idation shall adopt, by a vote of two-thirds of the directors present at
the time of the vote, if a quorum is present at that time, or by a vote
of the number of directors required under the certificate of incorpo-
ration, by-laws, this chapter, and any other applicable law, a plan of
merger or consolidation.
Section two amends subparagraph 1 of paragraph a of section 1002 of the
not-for-profit corporation law to require a vote by two-thirds of the
directors present at the time of the vote, if a quorum is present at
that time, in order to dissolve the corporation.
Section three provides the effective date.
JUSTIFICATION:
This bill will amend the Not-for-Profit Corporation Law (NPCL) in
relation to corporate consolidation, merger or dissolution. Currently,
the NPCL allows boards to authorize such actions by a simple majority of
a quorum of the board, whereas the law requires a higher standard for
other corporate action. For example, to change the number of directors,
the vote of a majority of the entire board is required; to elect an
officer or to purchase or sell real property on behalf of the corpo-
ration, a two-thirds majority vote of the entire board is needed. Since
the decision to merge, consolidate, or dissolve is arguably the most
important decision that a corporation can make, this bill will amend the
NPCL to require a vote in favor of such action by two-thirds of the
directors present at the time of the vote, if a quorum is present at
that time, or alternatively, by a vote of the number of directors
required under the corporation's certificate of incorporation, its
by-laws, this chapter, and any other applicable law.
PRIOR LEGISLATIVE HISTORY:
2020: A.222 Passed Assembly / S.7361 Referred to Corporation, Authori-
ties and Commissions
2019: A.222 Passed Assembly / S.7361 Referred to Corporation, Authori-
ties and Commissions
2018: Passed Assembly / S.8637A Referred to Corporations
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
On the ninetieth day after it shall have become a law.
STATE OF NEW YORK
________________________________________________________________________
213
2021-2022 Regular Sessions
IN ASSEMBLY(Prefiled)
January 6, 2021
___________
Introduced by M. of A. PAULIN, GALEF, ABINANTI, OTIS, JACOBSON -- 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
voting requirements of the board of certain corporations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The opening paragraph of paragraph (a) of section 902 of
2 the not-for-profit corporation law is amended to read as follows:
3 The board of each corporation proposing to participate in a merger or
4 consolidation under section 901 (Power of merger or consolidation) shall
5 adopt, by a vote of two-thirds of the directors present at the time of
6 the vote, if a quorum is present at that time, or by a vote of the
7 number of directors required under the certificate of incorporation,
8 by-laws, this chapter and any other applicable law, a plan of merger or
9 consolidation, setting forth:
10 § 2. Subparagraph 1 of paragraph (a) of section 1002 of the not-for-
11 profit corporation law, as amended by chapter 549 of the laws of 2013,
12 is amended to read as follows:
13 (1) In the case of a vote by the board of directors: (i) the number of
14 directors required under the certificate of incorporation, by-laws, this
15 chapter and any other applicable law; [or]
16 (ii) two-thirds of the directors present at the time of the vote, if a
17 quorum is present at that time; or
18 (iii) if the number of directors actually holding office as such at
19 the time of the vote to adopt the plan is less than the number required
20 to constitute a quorum of directors under the certificate of incorpo-
21 ration, the by-laws, this chapter or any other applicable law, the
22 remaining directors unanimously;
23 § 3. This act shall take effect on the ninetieth day after it shall
24 have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01795-01-1
