The New York Nonprofit Revitalization Act of 2013 (the “Act”) was signed into law on December 18, 2013 by Governor Andrew M. Cuomo. The Act is applicable to any nonprofit organization that is incorporated, operates or solicits charitable contributions in New York. The three main purposes of the Act are to:
- Eliminate unnecessary administrative and procedural burdens
- Modernize the New York nonprofit law, and
- Strengthen governance through compliance with certain best practices
On December 11, 2015, Governor Cuomo signed into law legislation further amending the Act. The amendments were aimed at correcting certain barriers to implementation of the Act and acknowledged certain deficiencies that were present in the Act since its adoption. Some of the more significant changes made to the Act are as follows:
- The definition of “related party” was modified to include “any other person who exercises the powers of directors, officers, or key employees over the affairs of the corporation or any affiliate.”
- The definition of “affiliate” was updated so that only organizations that are controlled by, or in control of, a corporation are included. Organizations under “common” control are no longer included in the definition.
- The definition of “independent director” was modified. The new definition now precludes any director who has a relative who is a current owner or is a director, officer, or employee of the firm conducting the organization’s annual audit currently, or during the past three years, from qualifying as an independent director.
- The definition of “entire board” was updated to allow the Board of Directors to set, by majority vote, the number of directors constituting the “entire board.”
- The law was clarified to state that if a director needs to step out of the room due to a conflict of interest or related party transaction, they are still considered “present” at the meeting for quorum purposes and voting purposes. Essentially, the director is counted as a “no” vote.
- Language was added to provide guidance to organizations on different methods in which they can distribute their whistleblower policy to employees and volunteers.
In addition, the effective date of the No-Employee-As-Chair-Rule has been delayed from January 1, 2016 to January 1, 2017. Under this rule, an employee of a nonprofit is prohibited from serving as the chair of the board or holding any other title with similar responsibilities.
Nonprofits should familiarize themselves with both the Act and the new changes made to the Act, especially the changes in definitions.
Please don’t hesitate to reach out to us should you have any questions regarding the amendments noted above. We would be more than happy to assist you.