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A00433 Summary:

BILL NOA00433
 
SAME ASSAME AS S02267
 
SPONSORPaulin
 
COSPNSRSeawright, Otis
 
MLTSPNSR
 
Amd 715-b, 716, 717, 718 & 720-a, N-PC L
 
Provides for the regulation of key persons in addition to directors and officers of certain corporations.
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A00433 Actions:

BILL NOA00433
 
01/09/2019referred to corporations, authorities and commissions
02/12/2019reported referred to codes
03/05/2019reported
03/07/2019advanced to third reading cal.95
03/11/2019passed assembly
03/11/2019delivered to senate
03/11/2019REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
04/08/2019SUBSTITUTED FOR S2267
04/08/20193RD READING CAL.287
04/08/2019PASSED SENATE
04/08/2019RETURNED TO ASSEMBLY
10/28/2019delivered to governor
11/08/2019signed chap.445
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A00433 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A433
 
SPONSOR: Paulin
  TITLE OF BILL: An act to amend the not-for-profit corporation law, in relation to the regulation of key persons   PURPOSE: To add key persons to the list of persons to whom certain policies apply.   SUMMARY OF PROVISIONS: Section 1 amends subparagraph 715-b (b)(4) of NFP Corporations Law to add "key person" to the list of individuals subject to the provisions of that section. Section 2 amends NFP Corporations Law section 716 to add "key person" to the list of persons subject to the provisions of that section. Section 3 amends NFP Corporations Law section 717 to add "key person" to the list of persons subject to the provisions of that section. Section 4 amends NFP Corporations Law section 718 to add "key persons" to the list of persons subject to the provisions of that section. Section 5 amends NFP Corporation Law section 720-a to add "key person" to the list of persons subject to the provisions of that section. Section 6 provides the effective date.   EXISTING LAW: The Not-for-Profit Corporations Law includes various provisions relating to key persons.   JUSTIFICATION: Substantial amendments were made in 2013 to the Not-for-Profit Corpo- rations Law, including provisions regarding key persons within such corporations. Other provisions related to officers, directors and employees of such corporations. This bill expands on those amendments to add "key person" to several sections recognizing the importance that key persons can play in certain not for profit corporations. This bill was introduced at the request of the Law Revision Commission.   LEGISLATIVE HISTORY: 2018: A.10654 Passed Assembly / S.8216 Committed to Rules   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: Immediately.
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A00433 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                           433
 
                               2019-2020 Regular Sessions
 
                   IN ASSEMBLY
 
                                       (Prefiled)
 
                                     January 9, 2019
                                       ___________
 
        Introduced  by  M.  of A. PAULIN, SEAWRIGHT -- 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  the
          regulation of key persons

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Paragraph (a)  and  subparagraph  4  of  paragraph  (b)  of
     2  section 715-b of the not-for-profit corporation law, as amended by chap-
     3  ter 466 of the laws of 2016, are amended to read as follows:
     4    (a)  Except as provided in paragraph (c) of this section, the board of
     5  every corporation that has twenty or more employees  and  in  the  prior
     6  fiscal  year  had  annual revenue in excess of one million dollars shall
     7  adopt, and oversee the implementation of, and compliance with, a  whist-
     8  leblower policy to protect from retaliation persons who report suspected
     9  improper  conduct.  Such policy shall provide that no director, officer,
    10  key person, employee or volunteer of a corporation  who  in  good  faith
    11  reports  any  action  or  suspected action taken by or within the corpo-
    12  ration that is illegal, fraudulent or in violation of any adopted policy
    13  of the corporation shall suffer intimidation, harassment, discrimination
    14  or other retaliation or, in the case of  employees,  adverse  employment
    15  consequence.
    16    (4)  A  requirement  that  a  copy of the policy be distributed to all
    17  directors, officers,  key  persons,  employees  and  to  volunteers  who
    18  provide  substantial  services  to the corporation. For purposes of this
    19  subdivision, posting the policy on the corporation's website or  at  the
    20  corporation's  offices in a conspicuous location accessible to employees
    21  and volunteers are among the methods a corporation may  use  to  satisfy
    22  the distribution requirement.
    23    §  2. Section 716 of the not-for-profit corporation law, as amended by
    24  chapter 549 of the laws of 2013, is amended to read as follows:
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD01660-01-9

        A. 433                              2
 
     1  § 716. Loans to directors [and], officers and key persons.
     2    No  loans,  other  than  through the purchase of bonds, debentures, or
     3  similar obligations of the type customarily sold in public offerings, or
     4  through ordinary deposit of funds in a bank, shall be made by  a  corpo-
     5  ration  to  its directors [or], officers or key persons, or to any other
     6  corporation, firm, association or other entity in which one or  more  of
     7  its directors [or], officers or key persons are directors [or], officers
     8  or  key  persons or hold a substantial financial interest, except a loan
     9  by one charitable corporation to another charitable corporation. A  loan
    10  made  in  violation  of this section shall be a violation of the duty to
    11  the corporation of the directors or officers authorizing it  or  partic-
    12  ipating  in  it,  but the obligation of the borrower with respect to the
    13  loan shall not be affected thereby.
    14    § 3. Section 717 of the not-for-profit corporation law, paragraph  (a)
    15  as  amended  by  chapter  490  of  the laws of 2010 and paragraph (b) as
    16  amended by chapter 734 of the laws  of  1988,  is  amended  to  read  as
    17  follows:
    18  § 717. Duty of directors [and], officers and key persons.
    19    (a)  Directors  [and],  officers  and  key persons shall discharge the
    20  duties of their respective positions in good faith and with the care  an
    21  ordinarily  prudent person in a like position would exercise under simi-
    22  lar circumstances. The factors set forth in subparagraph  one  of  para-
    23  graph  (e) of section 552 (Standard of conduct in managing and investing
    24  an institutional fund), if relevant, must be considered by  a  governing
    25  board  delegating  investment management of institutional funds pursuant
    26  to section 514 (Delegation of investment  management)  For  purposes  of
    27  this  paragraph,  the  term institutional fund is defined in section 551
    28  (Definitions).
    29    (b) In discharging their duties, directors  [and],  officers  and  key
    30  persons,  when  acting in good faith, may rely on information, opinions,
    31  reports or statements including financial statements and other financial
    32  data, in each case prepared or presented by: (1) one or more officers or
    33  employees of the corporation, whom the director believes to be  reliable
    34  and  competent in the matters presented, (2) counsel, public accountants
    35  or other persons as to matters which the directors [or], officers or key
    36  persons believe to be within such person's professional or expert compe-
    37  tence or (3) a committee of the board upon which they do not serve, duly
    38  designated in accordance with a provision of the certificate of incorpo-
    39  ration or the bylaws, as to matters  within  its  designated  authority,
    40  which  committee  the directors [or], officers or key persons believe to
    41  merit confidence, so long as in so relying they shall be acting in  good
    42  faith  and  with  that degree of care specified in paragraph (a) of this
    43  section.  Persons shall not be considered to be acting in good faith  if
    44  they  have  knowledge concerning the matter in question that would cause
    45  such reliance to be unwarranted. Persons who  so  perform  their  duties
    46  shall  have  no  liability  by  reason of being or having been directors
    47  [or], officers or key persons of the corporation.
    48    § 4. Section 718 of the not-for-profit corporation law, as amended  by
    49  chapter 549 of the laws of 2013, is amended to read as follows:
    50  § 718. List of directors [and], officers and key persons.
    51    (a)  If  a  member  or  creditor of a corporation, in person or by his
    52  attorney or agent, or a representative of the district  attorney  or  of
    53  the  secretary  of state, the attorney general, or other state official,
    54  makes a written demand on a corporation to inspect a current list of its
    55  directors [and], officers and key persons, the corporation shall, within
    56  two business days after receipt of the demand and for a  period  of  one

        A. 433                              3
 
     1  week  thereafter,  make  the  list  available for such inspection at its
     2  office during usual business hours.
     3    (b)  Upon  refusal  by  the  corporation to make a current list of its
     4  directors [and], officers and key  persons  available,  as  provided  in
     5  paragraph  (a) of this section, the person making a demand for such list
     6  may apply, ex parte, to the supreme court at a special term held  within
     7  the judicial district where the office of the corporation is located for
     8  an  order  directing  the  corporation  to make such list available. The
     9  court may grant such order or take such other action as it may deem just
    10  and proper.
    11    § 5. Section 720-a of the not-for-profit corporation law, as added  by
    12  chapter 220 of the laws of 1986, is amended to read as follows:
    13  § 720-a. Liability  of  directors,  officers  [and],  trustees  and  key
    14             persons.
    15    Except as provided  in  sections  seven  hundred  nineteen  and  seven
    16  hundred  twenty  of  this  chapter,  and except any action or proceeding
    17  brought by the attorney general or, in the case of a  charitable  trust,
    18  an  action  or  proceeding against a trustee brought by a beneficiary of
    19  such trust, no person serving without compensation as a director,  offi-
    20  cer,  key  person or trustee of a corporation, association, organization
    21  or trust described in section 501 (c) (3) of the United States  internal
    22  revenue  code shall be liable to any person other than such corporation,
    23  association, organization or trust based solely on his or her conduct in
    24  the execution of such office unless the conduct of such director,  offi-
    25  cer,  key person or trustee with respect to the person asserting liabil-
    26  ity constituted gross negligence or was intended to cause the  resulting
    27  harm  to  the  person  asserting  such  liability.  For purposes of this
    28  section, such a director, officer, key person or trustee  shall  not  be
    29  considered  compensated solely by reason of payment of his or her actual
    30  expenses incurred in attending meetings or otherwise in the execution of
    31  such office.
    32    § 6. This act shall take effect immediately.
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