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January 1, 2014

New York – effective July 1, 2014 NY amends the Not-for-Profit Corporation Law

The New York Non-Profit Revitalization Act of 2013 was signed into law by Governor Cuomo on December 18 and effective July 1, 2014. It amends the Not-for-Profit Corporation Law (the “NPCL”), the Estates Powers and Trusts Law, and Article 7-A of the Executive Law, to reduce unnecessary and outdated burdens on nonprofits and to enhance nonprofit governance and oversight to prevent fraud and improve public trust.  The text of the bill can be seen here.

Some highlights of the new law are:

One of the most significant changes in the Act is the replacement of New York’s four types of nonprofit corporations (Type A, B, C and D) with a more simple two types of nonprofit corporations: charitable and non-charitable. Under the Act, nonprofits formally known as Types B and C entities, as well as Type D entities formed for a charitable purpose, will be designated as “charitable” corporations. Type A and all other Type D entities will be designated as “non-charitable” corporations. Charitable purposes are defined as “charitable, educational, religious, scientific, literary, cultural or for the prevention of cruelty to children or animals.”

From July 1, 2014, to June 30, 2017, the Act uses a sliding scale for financial reporting and audit requirements. The new law raises the gross revenue thresholds for such audits over time. Starting on July 1, 2014, certified audits will be required for those entities with revenue and support in excess of $500,000. The threshold will be raised to $750,000 as of July 1, 2017 and $1 million as of July 1, 2021. The Law requires submission of audit reports to the Attorney General for entities registered to solicit and collect funds for charitable purposes

Under the Act, nonprofits may use electronic mail to transmit board and membership meeting notices and waivers of notice, and to enter into unanimous written consents. Board members will also be able to participate in meetings by video conference, and notices and consents under the NPCL may be sent via e-mail and fax.

The Act requires every nonprofit with 20 or more employees and annual revenue in excess of $1 million in the prior fiscal year to adopt a whistleblower policy.

The Act mandates every nonprofit to adopt a conflict of interest policy to ensure that its directors, officers and key employees act in the nonprofit’s best interest. This provision applies to all nonprofits incorporated in or transacting business in New York.

The Act expressly prohibits employees (including its CEO) from serving as chair of the board or in an officer position with similar responsibilities.

Certain corporate actions, such as changes to the certificate of incorporation, mergers, sale of all or substantially all assets, and dissolutions may now be approved by the Attorney General.