Establishes that no corporation shall have a membership comprised of fewer than three persons, except for a corporation that has no members; may have a corporation, joint-stock association, unincorporated association or partnership as a sole member, if it is owned or controlled by no fewer than three persons.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10336A
SPONSOR: Paulin (MS) TITLE OF BILL: An act to amend the not-for-profit corporation law, in
relation to requiring that no corporation have a membership of fewer
than three persons
PURPOSE:
To prevent a sole individual from being the only member of a charitable
nonprofit corporation.
SUMMARY OF PROVISIONS:
Section one of the bill amends paragraph a of section 601 of the not-
for-profit corporation law to provide that as of July 1, 2019, no corpo-
ration except a corporation that has no members, shall have a membership
comprised of fewer than three persons. A corporation may have a corpo-
ration, joint-stock association, unincorporated association or partner-
ship as a sole member, if such corporation, joint-stock association,
unincorporated association or partnership is owned or controlled by no
fewer than three persons
Section two provides the effective date.
JUSTIFICATION:
Under the not-for-profit corporation law (NPCL), a single individual is
authorized to be the only member of a charitable nonprofit corporation.
Charitable nonprofits utilize a governance structure known as a "member
model," whereby a membership comprised of one or more individuals or
entity members reserves the right to elect a board of directors. Current
law does not prevent one sole member of a charitable nonprofit from
electing a board of directors. This is a significant loophole.
Amending the NPCL to preclude the possibility that a charitable nonpro-
fit be controlled by any one member will prevent abuse by individuals
who may try to use a charitable nonprofit for his or her own private
interest.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
________________________________________________________________________
10336--A
IN ASSEMBLY
April 10, 2018
___________
Introduced by M. of A. PAULIN, COOK, MONTESANO, BARRON, GUNTHER, JAFFEE,
MAGNARELLI, RIVERA, ERRIGO, GALEF -- Multi-Sponsored by -- M. of A.
CROUCH, LAWRENCE -- read once and referred to the Committee on Corpo-
rations, Authorities and Commissions -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee
AN ACT to amend the not-for-profit corporation law, in relation to
requiring that no corporation have a membership of fewer than three
persons
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 601 of the not-for-profit corpo-
2 ration law, as amended by chapter 549 of the laws of 2013, is amended to
3 read as follows:
4 (a) A corporation shall have one or more classes of members, or, in
5 the case of a charitable corporation, may have no members, in which case
6 any such provision for classes of members or for no members shall be set
7 forth in the certificate of incorporation or the by-laws. Corporations,
8 joint-stock associations, unincorporated associations and partnerships,
9 as well as any other person without limitation, may be members, provided
10 however, that effective July first, two thousand nineteen, no corpo-
11 ration except a corporation that has no members, shall have a membership
12 comprised of fewer than three persons. A corporation may have a corpo-
13 ration, joint-stock association, unincorporated association or partner-
14 ship as a sole member, if such corporation, joint-stock association,
15 unincorporated association or partnership is owned or controlled by no
16 fewer than three persons.
17 § 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD15274-02-8
