This bill has been amended

Bill S5370-2015

Relates to corporations serving as chair of a board

Relates to corporations serving as chair of a board; includes exceptions.

Details

Actions

  • May 14, 2015: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Memo

BILL NUMBER:S5370

TITLE OF BILL:

An act to amend the not-for-profit corporation law, in relation to corporations serving as chair of a board

PURPOSE OR GENERAL IDEA OF BILL:

To provide an exception to the prohibition on not-for-profit employees serving as chairperson of the board of directors of the corporation.

SUMMARY OF SPECIFIC PROVISIONS:

Section one: Provides an exception to the prohibition on not-for-profit employees serving as chairperson of the board of directors of the corporation.

Section two of the bill establishes the effective date.

JUSTIFICATION:

Paragraph (f) of section 713 of the Not-For-Profit Law was added in the Not-For-Profit Revitalization Act of 2013 and will become effective on January 1, 2016.

The intent of paragraph (f) was to prevent employees of a not-for-profit corporation from serving as chair of the not-for-profit's board of directors. Some not-for-profit corporations have a governance structure where the chair is an employee of the corporation and this prohibition would be an undue hardship for such entities.

This amendment would require that the board of directors be aware of the potential for compromised board oversight, discuss alternative options, and to document on what basis they have chosen to authorize an employee to serve as chairperson. Such basis must be sent to the Attorney General within a certain period of time of such a board decision.

This bill, if enacted, would still provide a disincentive for an employee to act as a chairperson of the board of directors but would provide flexibility to the not-for-profit community to allow for such a governance structure while maintaining Attorney General oversight for entities that choose to have an employee act as chair of the board of directors

PRIOR LEGISLATIVE HISTORY:

This is a new bill.

FISCAL IMPLICATIONS:

None

EFFECTIVE DATE:

This act shall take effect on January 1, 2016.


Text

STATE OF NEW YORK ________________________________________________________________________ 5370 2015-2016 Regular Sessions IN SENATE May 14, 2015 ___________
Introduced by Sen. RANZENHOFER -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Author- ities and Commissions AN ACT to amend the not-for-profit corporation law, in relation to corporations serving as chair of a board THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph (f) of section 713 of the not-for-profit corpo- ration law, as added by chapter 549 of the laws of 2013, is amended to read as follows: (f) No employee of the corporation shall serve as chair of the board or hold any other title with similar responsibilities UNLESS THE BOARD APPROVES SUCH EMPLOYEE SERVING AS CHAIR OF THE BOARD BY A MAJORITY VOTE OF THE WHOLE BOARD AND CONTEMPORANEOUSLY DOCUMENTS IN WRITING THE BASIS FOR THE BOARD APPROVAL INCLUDING THE BOARD'S CONSIDERATION OF ALTERNA- TIVE OPTIONS. THE CONTEMPORANEOUSLY DOCUMENTED BASIS OF SUCH APPROVAL SHALL BE PROVIDED TO THE ATTORNEY GENERAL WITHIN SIXTY DAYS OF SUCH APPROVAL IN WRITTEN OR ELECTRONIC FORM. S 2. This act shall take effect on the same date and in the same manner as paragraph (f) of section 713 of the not-for-profit corporation law, takes effect, pursuant to chapter 549 of the laws of 2013, as amended.

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