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S07913 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         7913--B
            Cal. No. 1331
 
                    IN SENATE
 
                                      May 24, 2016
                                       ___________
 
        Introduced  by  Sen.  RANZENHOFER -- read twice and ordered printed, and
          when printed to be committed to the Committee on Corporations, Author-
          ities and Commissions  --  reported  favorably  from  said  committee,
          ordered  to first and second report, amended on second report, ordered
          to a third reading, and to be  reprinted  as  amended,  retaining  its
          place  in  the  order  of  third  reading -- again amended and ordered
          reprinted, retaining its place in the order of third reading
 
        AN ACT to amend the not-for-profit  corporation  law  and  the  estates,
          powers and trusts law, in relation to reformation of charitable corpo-
          rations  and trust governance; and to repeal certain provisions of the
          not-for-profit corporation law and the estates, powers and trusts  law
          relating thereto
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Subparagraphs 21, 23, 24 and 25 of paragraph (a) of section
     2  102 of the not-for-profit corporation law, subparagraphs 21, 23  and  25
     3  as  amended  by  chapter  555 of the laws of 2015 and subparagraph 24 as
     4  added by chapter 549 of the  laws  of  2013,  are  amended  to  read  as
     5  follows:
     6    (21)  "Independent director" means a director who: (i) is not, and has
     7  not been within the last three years, an employee or a key person of the
     8  corporation or an affiliate of the corporation,  and  does  not  have  a
     9  relative who is, or has been within the last three years, a key [employ-
    10  ee]  person  of the corporation or an affiliate of the corporation; (ii)
    11  has not received, and does not have a relative who has received, in  any
    12  of the last three fiscal years, more than ten thousand dollars in direct
    13  compensation  from  the  corporation  or an affiliate of the corporation
    14  [(other than reimbursement for expenses reasonably incurred as a  direc-
    15  tor or reasonable compensation for service as a director as permitted by
    16  paragraph  (a)  of  section 202 (General and special powers))]; (iii) is
    17  not a current employee of or  does  not  have  a  substantial  financial
    18  interest in, and does not have a relative who is a current officer of or
    19  has  a  substantial  financial  interest  in,  any entity that has [made
    20  payments] provided  payments,  property  or  services  to,  or  received
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD14985-09-6

        S. 7913--B                          2
 
     1  payments,  property or services from, the corporation or an affiliate of
     2  the corporation [for] if the amount paid by the corporation to the enti-
     3  ty or received by the corporation from the entity for such  property  or
     4  services  [in  an  amount which], in any of the last three fiscal years,
     5  [exceeds the lesser of twenty-five thousand dollars or  two  percent  of
     6  such  entity's  consolidated  gross revenues] exceeded the lesser of ten
     7  thousand dollars or two percent  of  such  entity's  consolidated  gross
     8  revenues  if  the entity's consolidated gross revenue was less than five
     9  hundred thousand dollars; twenty-five thousand dollars if  the  entity's
    10  consolidated gross revenue was five hundred thousand dollars or more but
    11  less than ten million dollars; one hundred thousand dollars if the enti-
    12  ty's consolidated gross revenue was ten million dollars or more; or (iv)
    13  is  not  and  does  not  have a relative who is a current owner, whether
    14  wholly or partially, director, officer or employee of the  corporation's
    15  outside auditor or who has worked on the corporation's audit at any time
    16  during the past three years. For purposes of this [subdivision,] subpar-
    17  agraph,  the  terms:  "compensation"  does not include reimbursement for
    18  expenses reasonably incurred as a director  or  reasonable  compensation
    19  for  service  as a director as permitted by paragraph (a) of section 202
    20  (General and special powers) of this chapter;  and  "payment"  does  not
    21  include  charitable  contributions, dues or fees paid to the corporation
    22  for services which the corporation performs as  part  of  its  nonprofit
    23  purposes, or payments made by the corporation at fixed or non-negotiable
    24  rates  or  amounts for services received, provided that such services by
    25  and to the corporation are available to individual members of the public
    26  on the same terms, and such services received by the corporation are not
    27  available from another source.
    28    (23) "Related party" means (i) any director, officer or key [employee]
    29  person of the corporation or any affiliate of the corporation[,  or  any
    30  other  person  who  exercises  the  powers of directors, officers or key
    31  employees over the affairs of the corporation or any  affiliate  of  the
    32  corporation];  (ii)  any  relative of any individual described in clause
    33  (i) of this [subdivision] subparagraph; or (iii) any entity in which any
    34  individual described in clauses  (i)  and  (ii)  of  this  [subdivision]
    35  subparagraph  has  a thirty-five percent or greater ownership or benefi-
    36  cial interest or, in the case of a partnership  or  professional  corpo-
    37  ration,  a  direct  or  indirect  ownership  interest  in excess of five
    38  percent.
    39    (24) "Related party transaction" means any transaction,  agreement  or
    40  any  other arrangement in which a related party has a financial interest
    41  and in which the corporation or any affiliate of the  corporation  is  a
    42  participant,  except  that  a  transaction  shall not be a related party
    43  transaction if: (i) the transaction or  the  related  party's  financial
    44  interest  in  the  transaction is de minimis, (ii) the transaction would
    45  not customarily be reviewed by the board or boards of similar  organiza-
    46  tions  in  the ordinary course of business and is available to others on
    47  the same or similar terms, or (iii) the transaction constitutes a  bene-
    48  fit  provided  to  a  related party solely as a member of a class of the
    49  beneficiaries that the corporation intends to benefit  as  part  of  the
    50  accomplishment of its mission which benefit is available to all similar-
    51  ly situated members of the same class on the same terms.
    52    (25) "Key [employee] person" means any person [who is in a position to
    53  exercise  substantial  influence over the affairs of the corporation, as
    54  referenced in 26 U.S.C. § 4958(f)(1)(A) and further specified in 26  CFR
    55  § 53.4958-3(c), (d) and (e), or succeeding provisions to the extent such
    56  provisions are applicable], other than a director or officer, whether or

        S. 7913--B                          3
 
     1  not  an  employee  of  the corporation, who (i) has responsibilities, or
     2  exercises powers or influence over the corporation as a whole similar to
     3  the responsibilities, powers, or influence of  directors  and  officers;
     4  (ii)  manages  the  corporation,  or  a  segment of the corporation that
     5  represents a substantial portion of the activities,  assets,  income  or
     6  expenses  of  the corporation; or (iii) alone or with others controls or
     7  determines a substantial portion of the corporation's  capital  expendi-
     8  tures or operating budget.
     9    §  2. Section 114 of the not-for-profit corporation law, as amended by
    10  chapter 549 of the laws of 2013, is amended to read as follows:
    11  § 114. Visitation of supreme court.
    12    Charitable corporations, whether formed under general or special laws,
    13  with their books and vouchers, shall be subject to  the  visitation  and
    14  inspection of a justice of the supreme court, or of any person appointed
    15  by the court for that purpose. If it appears by the verified petition of
    16  a  member,  director,  officer or creditor of any such corporation, that
    17  it, or its directors, officers,  members,  key  [employees]  persons  or
    18  agents,  have misappropriated any of the funds or property of the corpo-
    19  ration, or diverted them from the purpose of its incorporation, or  that
    20  the  corporation  has acquired property in excess of the amount which it
    21  is authorized by law to hold, or has engaged in any business other  than
    22  that  stated  in  its  certificate of incorporation, the court may order
    23  that notice of at least eight days, with a  copy  of  the  petition,  be
    24  served  on the corporation, the attorney general and the persons charged
    25  with misconduct, requiring them to show cause at a time and place speci-
    26  fied, why they should not be required to make and file an inventory  and
    27  account  of  the  property,  effects and liabilities of such corporation
    28  with a detailed statement of its transactions during the  twelve  months
    29  next preceding the granting of such order. On the hearing of such appli-
    30  cation,  the  court  may make an order requiring such inventory, account
    31  and statement to be filed, and proceed to take and state an  account  of
    32  the property and liabilities of the corporation, or may appoint a refer-
    33  ee  for that purpose. When such account is taken and stated, after hear-
    34  ing all the parties to the application, the  court  may  enter  a  final
    35  order determining the amount of property so held by the corporation, its
    36  annual  income,  whether any of the property or funds of the corporation
    37  have been misappropriated or diverted to any other purpose than that for
    38  which such corporation was incorporated, and  whether  such  corporation
    39  has  been  engaged  in  any  activity  not covered by its certificate of
    40  incorporation. An appeal may be  taken  from  the  order  by  any  party
    41  aggrieved  to  the  appellate  division of the supreme court, and to the
    42  court of appeals, as in a civil action. No corporation shall be required
    43  to make and file more than one inventory and account in  any  one  year,
    44  nor  to make a second account and inventory, while proceedings are pend-
    45  ing for the statement of an account under this section.
    46    § 3. Section 309 of the not-for-profit corporation law,  as  added  by
    47  chapter 549 of the laws of 2013, is amended to read as follows:
    48  § 309. Personal  jurisdiction  and service of process on non-domiciliary
    49           resident director, officer, key [employee] person or agent.
    50    A person, by becoming a director, officer, key  [employee]  person  or
    51  agent  of  a  corporation is subject to the personal jurisdiction of the
    52  supreme court of the state of New York, and in an action  or  proceeding
    53  by  the  attorney  general under this chapter process may be served upon
    54  such person as provided in section three hundred thirteen of  the  civil
    55  practice law and rules.

        S. 7913--B                          4
 
     1    §  4.  Paragraphs  (a)  and  (e)  of section 712 of the not-for-profit
     2  corporation law, paragraph (a) as amended by chapter 549 of the laws  of
     3  2013  and  paragraph  (e) as amended by chapter 555 of the laws of 2015,
     4  are amended to read as follows:
     5    (a)  [If  the]  The certificate of incorporation [or the], the by-laws
     6  [so provide], or the board[, by resolution adopted by a majority of  the
     7  entire  board, may designate from among its members an executive commit-
     8  tee and other committees] may  create  committees  of  the  board,  each
     9  consisting of three or more directors[, and each of which, to the extent
    10  provided  in  the  resolution  or in the certificate of incorporation or
    11  by-laws, shall have all the authority of the  board].  The  board  shall
    12  appoint  the  members of such committee of the board, except that in the
    13  case of any executive committee or  similar  committee  however  denomi-
    14  nated,  the appointment shall be made by a majority of the entire board,
    15  provided that in the case of a board of  thirty  members  or  more,  the
    16  appointment  shall  be  made by at least three-quarters of the directors
    17  present at the time of the vote, if a quorum is present at that time. In
    18  addition, the by-laws may provide that directors who are the holders  of
    19  certain  positions  in  the  corporation  shall be ex-officio members of
    20  specific committees. Each such committee shall have the authority of the
    21  board to the extent provided in a board resolution or in the certificate
    22  of incorporation or by-laws, except that no [such] committee of any kind
    23  shall have authority as to the following matters:
    24    (1) The  submission  to  members  of  any  action  requiring  members'
    25  approval under this chapter.
    26    (2)  The  filling  of  vacancies  in  the board of directors or in any
    27  committee.
    28    (3) The fixing of compensation of the directors  for  serving  on  the
    29  board or on any committee.
    30    (4)  The  amendment  or  repeal  of the by-laws or the adoption of new
    31  by-laws.
    32    (5) The amendment or repeal of any resolution of the  board  which  by
    33  its terms shall not be so amendable or repealable.
    34    (6) The election or removal of officers and directors.
    35    (7) The approval of a merger or plan of dissolution.
    36    (8) The adoption of a resolution recommending to the members action on
    37  the  sale,  lease, exchange or other disposition of all or substantially
    38  all the assets of a corporation or, if there are no members entitled  to
    39  vote, the authorization of such transaction.
    40    (9) The approval of amendments to the certificate of incorporation.
    41    (e) Committees, other than committees of the board, whether created by
    42  the  board or by the members, shall be committees of the corporation. No
    43  such committee shall have the authority to bind the  board.  [Provisions
    44  of  this chapter applicable to officers generally shall apply to members
    45  of such committees.] Members of such committees of the corporation,  who
    46  may  be  non-directors,  shall be elected or appointed in the manner set
    47  forth in the by-laws, or if not set forth in the by-laws,  in  the  same
    48  manner as officers of the corporation.
    49    §  5. Paragraph (c) of section 712-a of the not-for-profit corporation
    50  law is REPEALED.
    51    § 6. Paragraph (f) of section 713 of  the  not-for-profit  corporation
    52  law,  as added by chapter 549 of the laws of 2013, is amended to read as
    53  follows:
    54    (f) No employee of the corporation shall serve as chair of  the  board
    55  or  hold any other title with similar responsibilities, unless the board
    56  approves such employee serving as chair of the  board  by  a  two-thirds

        S. 7913--B                          5
 
     1  vote  of the entire board and contemporaneously documents in writing the
     2  basis for the board approval; provided, however, that no  such  employee
     3  shall  be  considered  an  independent director for the purposes of this
     4  chapter.
     5    §  7.  Paragraph  (a) of section 715 of the not-for-profit corporation
     6  law, as amended by chapter 549 of the laws of 2013, is amended  and  two
     7  new paragraphs (i) and (j) are added to read as follows:
     8    (a)  No  corporation  shall  enter  into any related party transaction
     9  unless the transaction is determined by  the  board,  or  an  authorized
    10  committee  thereof, to be fair, reasonable and in the corporation's best
    11  interest at the time of such determination. Any director, officer or key
    12  [employee] person who has an interest in  a  related  party  transaction
    13  shall  disclose  in  good faith to the board, or an authorized committee
    14  thereof, the material facts concerning such interest.
    15    (i) In an action by any person  or  entity  other  than  the  attorney
    16  general, it shall be a defense to a claim of violation of any provisions
    17  of  this  section  that  a  transaction  was fair, reasonable and in the
    18  corporation's best interest at the time  the  corporation  approved  the
    19  transaction.
    20    (j)  In  an  action  by the attorney general with respect to a related
    21  party transaction not approved in accordance with paragraphs (a) or  (b)
    22  of  this  section at the time it was entered into, whichever is applica-
    23  ble, it shall be a defense to a claim of violation of any provisions  of
    24  this  section  that  (1) the transaction was fair, reasonable and in the
    25  corporation's best interest at the time  the  corporation  approved  the
    26  transaction  and  (2) prior to receipt of any request for information by
    27  the attorney general regarding the transaction, the board has: (A) rati-
    28  fied the transaction by finding in good faith that it was fair,  reason-
    29  able  and in the corporation's best interest at the time the corporation
    30  approved the transaction; and, with respect to any related party  trans-
    31  action  involving  a charitable corporation and in which a related party
    32  has a substantial  financial  interest,  considered  alternative  trans-
    33  actions  to  the extent available, approving the transaction by not less
    34  than a majority vote of the directors or committee  members  present  at
    35  the  meeting;  (B) documented in writing the nature of the violation and
    36  the basis for the board's or  committee's  ratification  of  the  trans-
    37  action; and (C) put into place procedures to ensure that the corporation
    38  complies with paragraphs (a) and (b) of this section as to related party
    39  transactions in the future.
    40    §  8. Paragraph (a) of section 715-a of the not-for-profit corporation
    41  law, as added by chapter 549 of the laws of 2013, is amended to read  as
    42  follows:
    43    (a) Except as provided in paragraph (d) of this section, [every corpo-
    44  ration]  the  board  shall adopt, and oversee the implementation of, and
    45  compliance with, a conflict of interest policy to ensure that its direc-
    46  tors, officers and key [employees] persons act in the corporation's best
    47  interest and comply with applicable legal  requirements,  including  but
    48  not  limited  to  the  requirements  set  forth in section seven hundred
    49  fifteen of this article.
    50    § 9. Subparagraph 2 of paragraph (b) of section 715-a of the  not-for-
    51  profit  corporation law, as added by chapter 549 of the laws of 2013, is
    52  amended to read as follows:
    53    (2) procedures for disclosing a conflict of  interest  [to  the  audit
    54  committee  or,  if there is no audit committee,] or possible conflict of
    55  interest to the board or to a committee of the board, and procedures for
    56  the board or committee to determine whether a conflict exists;

        S. 7913--B                          6
 
     1    § 10. Paragraph (a) of section 715-b of the not-for-profit corporation
     2  law, as added by chapter 549 of the laws of 2013, is amended to read  as
     3  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  employee or volunteer of a corporation who in  good  faith  reports  any
    11  action  or  suspected  action taken by or within the corporation that is
    12  illegal, fraudulent or in violation of any adopted policy of the  corpo-
    13  ration  shall  suffer  intimidation, harassment, discrimination or other
    14  retaliation or, in the case  of  employees,  adverse  employment  conse-
    15  quence.
    16    §  11.  Subparagraphs 2 and 3 of paragraph (b) of section 715-b of the
    17  not-for-profit corporation law, subparagraph 2 as added by  chapter  549
    18  of  the laws of 2013 and subparagraph 3 as amended by chapter 555 of the
    19  laws of 2015, are amended to read as follows:
    20    (2) A requirement that an employee, officer or director of the  corpo-
    21  ration  be  designated  to  administer  the  whistleblower policy and to
    22  report to [the audit committee or other committee of independent  direc-
    23  tors or, if there are no such committees, to] the board or an authorized
    24  committee  thereof,  except  that  directors  who  are employees may not
    25  participate in any board or committee deliberations or  voting  relating
    26  to administration of the whistleblower policy; [and]
    27    (3) A requirement that the person who is the subject of a whistleblow-
    28  er  complaint  not  be  present  at or participate in board or committee
    29  deliberations or vote on the matter relating to such complaint, provided
    30  that nothing in this subparagraph shall prohibit the board or  committee
    31  from  requesting that the person who is subject to the complaint present
    32  information as background or answer questions at a  committee  or  board
    33  meeting  prior  to  the commencement of deliberations or voting relating
    34  thereto; and
    35    (4) A requirement that a copy of the  policy  be  distributed  to  all
    36  directors, officers, employees and to volunteers who provide substantial
    37  services  to  the corporation. For purposes of this subdivision, posting
    38  the policy on the corporation's website or at the corporation's  offices
    39  in  a  conspicuous  location  accessible to employees and volunteers are
    40  among the methods a corporation may  use  to  satisfy  the  distribution
    41  requirement.
    42    §  12.  The  section  heading  and paragraph (a) of section 720 of the
    43  not-for-profit corporation law, as amended by chapter 549 of the laws of
    44  2013, are amended to read as follows:
    45  Actions against directors, officers and key [employees] persons.
    46    (a) An action may be brought against one or more directors,  officers,
    47  or  key  [employees]  persons of a corporation to procure a judgment for
    48  the following relief:
    49    § 13. Subparagraphs 3, 6, 7 and 8 of paragraph (a) of section 8-1.9 of
    50  the estates, powers and trusts law, subparagraphs 3, 6 and 7 as  amended
    51  by  chapter 555 of the laws of 2015 and subparagraph 8 as added by chap-
    52  ter 549 of the laws of 2013, are amended to read as follows:
    53    (3) "Key [employee] person" means any person  other  than  a  trustee,
    54  whether  or  not an employee, who [is in a position to exercise substan-
    55  tial influence over the affairs of the trust, as referenced in 26 U.S.C.
    56  section  4958(f)(1)(A)  and  further  specified  in  26  C.F.R.  section

        S. 7913--B                          7

     1  53.4958-3(c),  (d)  and (e), or succeeding provisions to the extent such
     2  provisions are applicable] (i) has responsibilities, or exercises powers
     3  of influence over the trust as a whole similar to the  responsibilities,
     4  powers,  or  influence of trustees and officers; (ii) manages the trust,
     5  or a segment of the trust that represents a substantial portion  of  the
     6  activities,  assets,  income or expenses of the trust; or (iii) alone or
     7  with others controls or determines a substantial portion of the  trust's
     8  capital expenditures or operating budget.
     9    (6)  "Related party" means (i) any trustee or key [employee] person of
    10  the trust or any affiliate of the trust [or any other person  who  exer-
    11  cises  the  powers  of a trustee or key employee over the affairs of the
    12  trust or any affiliate of the trust]; (ii) any relative of any  individ-
    13  ual described in clause (i) of this [subdivision] subparagraph; or (iii)
    14  an  entity  in which any individual described in clauses (i) and (ii) of
    15  this [subdivision] subparagraph has a  thirty-five  percent  or  greater
    16  ownership  or  beneficial  interest  or, in the case of a partnership or
    17  professional corporation, a direct ownership interest in excess of  five
    18  percent.
    19    (7) "Independent trustee" means a trustee who: (i) is not, and has not
    20  been  within the last three years, an employee of the trust or an affil-
    21  iate of the trust, and does not have a relative  who  is,  or  has  been
    22  within  the last three years, a key [employee] person of the trust or an
    23  affiliate of the trust; (ii) has not received, and does not have a rela-
    24  tive who has received, in any of the last three fiscal years, more  than
    25  ten  thousand dollars in direct compensation from the trust or an affil-
    26  iate of the trust [(other than reimbursement for expenses or the payment
    27  of trustee commissions or reasonable compensation as  permitted  by  law
    28  and  the  governing  instrument)]; (iii) is not a current employee of or
    29  does not have a substantial financial interest in, and does not  have  a
    30  relative  who  is  a  current officer of or have a substantial financial
    31  interest in, any entity that  has  [made  payments]  provided  payments,
    32  property  or  services  to,  or  received payments, property or services
    33  from, the trust or an affiliate of the trust [for] if the amount paid by
    34  the trust to the entity or received by the trust  from  the  entity  for
    35  such property or services [in an amount which], in any of the last three
    36  fiscal years, [exceeds the lesser of twenty-five thousand dollars or two
    37  percent of such entity's consolidated gross revenues] exceeded the less-
    38  er  of ten thousand dollars or two percent of such entity's consolidated
    39  gross revenue if the entity's consolidated gross revenue was  less  than
    40  five hundred thousand dollars; twenty-five thousand dollars if the enti-
    41  ty's  consolidated  gross  revenue  was five hundred thousand dollars or
    42  more but less than ten million dollars; one hundred thousand dollars  if
    43  the entity's consolidated gross revenue was ten million dollars or more;
    44  or  (iv)  is  not  and  does not have a relative who is a current owner,
    45  whether wholly or  partially,  director,  officer  or  employee  of  the
    46  trust's  outside  auditor  or who has worked on the trust's audit at any
    47  time during the past three years. For purposes  of  this  [subdivision,]
    48  subparagraph,  the  terms: "compensation" does not include reimbursement
    49  for expenses or the payment of trustee commissions or reasonable compen-
    50  sation as permitted by law and the governing instrument;  and  "payment"
    51  does  not  include  charitable  contributions,  dues or fees paid to the
    52  trust for services which the trust performs as  part  of  its  nonprofit
    53  purposes, or payments made by the trust at fixed or non-negotiable rates
    54  or  amounts for services received, provided that such services by and to
    55  the trust are available to individual members of the public on the  same

        S. 7913--B                          8
 
     1  terms,  and  such  services provided to the trust are not available from
     2  another source.
     3    (8)  "Related  party  transaction" means any transaction, agreement or
     4  any other arrangement in which a related party has a financial  interest
     5  and  in  which the trust or any affiliate of the trust is a participant,
     6  except that a transaction shall not be a related party  transaction  if:
     7  (i)  the  transaction  or  the related party's financial interest in the
     8  transaction is de minimis, (ii) the transaction would not customarily be
     9  reviewed by the board, or boards of similar organizations, in the  ordi-
    10  nary  course of business and is available to others on the same or simi-
    11  lar terms, or (iii) the transaction constitutes a benefit provided to  a
    12  related  party  solely  as a member of a class of the beneficiaries that
    13  the trust intends to benefit  as  part  of  the  accomplishment  of  its
    14  mission  which benefit is available to all similarly situated members of
    15  the same class on the same terms.
    16    § 14. Subparagraph 3 of paragraph (b) of section 8-1.9 of the estates,
    17  powers and trusts law is REPEALED.
    18    § 15. Subparagraph 1 of paragraph (c) of section 8-1.9 of the estates,
    19  powers and trusts law, as added by chapter 549 of the laws of  2013,  is
    20  amended and two new subparagraphs 7 and 8 are added to read as follows:
    21    (1)  Notwithstanding  any  provision  of  the  trust instrument to the
    22  contrary, no trust shall enter into any related party transaction unless
    23  the transaction is determined by the trustees, or an authorized  commit-
    24  tee  thereof, to be fair, reasonable and in the trust's best interest at
    25  the time of such determination. Any trustee, officer or key employee who
    26  has an interest in a related party transaction shall  disclose  in  good
    27  faith  to the trustees, or an authorized committee thereof, the material
    28  facts concerning such interest.
    29    (7) In an action by any person  or  entity  other  than  the  attorney
    30  general, it shall be a defense to a claim of violation of any provisions
    31  of  this  paragraph  that  a transaction was fair, reasonable and in the
    32  trust's best interest at the time the trust approved the transaction.
    33    (8) In an action by the attorney general with  respect  to  a  related
    34  party  transaction  not  approved in accordance with subparagraph one or
    35  two of this paragraph at the time it  was  entered  into,  whichever  is
    36  applicable,  it  shall  be  a  defense  to  a  claim of violation of any
    37  provisions of this paragraph that (i) the transaction was fair,  reason-
    38  able and in the trust's best interest at the time the trust approved the
    39  transaction  and (ii) prior to receipt of any request for information by
    40  the attorney general regarding the transaction, the trustees  have:  (A)
    41  ratified  the  transaction  by  finding  in good faith that it was fair,
    42  reasonable and in the trust's best interest  at  the  time  the  trustee
    43  approved  the transaction; and, with respect to any related party trans-
    44  action involving a charitable corporation and in which a  related  party
    45  has  a  substantial  financial  interest,  considered alternative trans-
    46  actions to the extent available, approving the transaction by  not  less
    47  than a majority vote of the trustees or committee members present at the
    48  meeting;  (B)  documented in writing the nature of the violation and the
    49  basis for the trustees' or committee's ratification of the  transaction;
    50  and  (C)  put  into place procedures to ensure that the trustee complies
    51  with subparagraphs one and two of this paragraph  as  to  related  party
    52  transactions in the future.
    53    § 16. Subparagraph 1 of paragraph (d) of section 8-1.9 of the estates,
    54  powers  and  trusts law, as added by chapter 549 of the laws of 2013, is
    55  amended to read as follows:

        S. 7913--B                          9
 
     1    (1) Except as provided in subparagraph four of this  paragraph,  every
     2  trust  shall  adopt,  and  oversee the implementation of, and compliance
     3  with, a conflict of interest policy to ensure that its  trustees,  offi-
     4  cers  and  key [employees] persons act in the best interest of the trust
     5  and  its  beneficiaries  and  comply with applicable legal requirements,
     6  including but not limited to the requirements set forth  in  this  para-
     7  graph.
     8    §  17.  Clause (B) of subparagraph 2 of paragraph (d) of section 8-1.9
     9  of the estates, powers and trusts law, as added by chapter  549  of  the
    10  laws of 2013, is amended to read as follows:
    11    (B)  procedures  for  disclosing  a conflict of interest [to the audit
    12  committee or, if there is no audit committee,] or possible  conflict  of
    13  interest  to  the trustees or to a committee of the trustees, and proce-
    14  dures for the trustees or committee  to  determine  whether  a  conflict
    15  exists;
    16    § 18. Subparagraph 1 of paragraph (e) of section 8-1.9 of the estates,
    17  powers  and  trusts law, as added by chapter 549 of the laws of 2013, is
    18  amended to read as follows:
    19    (1) Except as provided in subparagraph three of  this  paragraph,  the
    20  trustees  of  every  trust  that has twenty or more employees and in the
    21  prior fiscal year had annual revenue in excess of  one  million  dollars
    22  shall  adopt,  and oversee the implementation of, and compliance with, a
    23  whistleblower policy to protect  from  retaliation  persons  who  report
    24  suspected  improper  conduct. Such policy shall provide that no officer,
    25  trustee, employee or volunteer of a trust who in good faith reports  any
    26  action or suspected action taken by or within the trust that is illegal,
    27  fraudulent  or  in  violation  of  any adopted policy of the trust shall
    28  suffer intimidation, harassment, discrimination or other retaliation or,
    29  in the case of employees, adverse employment consequence.
    30    § 19. Clauses (B) and (C)  of  subparagraph  2  of  paragraph  (e)  of
    31  section 8-1.9 of the estates, powers and trusts law, clause (B) as added
    32  by  chapter 549 of the laws of 2013 and clause (C) as amended by chapter
    33  555 of the laws of 2015, are amended to read as follows:
    34    (B) A requirement that a trustee, officer or employee of the trust  be
    35  designated to administer, the whistleblower policy and to report to [the
    36  audit  committee  or other committee of independent trustees, or to] the
    37  trustees or an authorized committee thereof, except  that  trustees  who
    38  are  employees  may  not  participate in any board or committee deliber-
    39  ations or voting relating to administration of the whistleblower policy;
    40  [and]
    41    (C) A requirement that the person who is the subject of a whistleblow-
    42  er complaint not be present at or  participate  in  board  or  committee
    43  deliberation  or vote on the matter relating to such complaint, provided
    44  that nothing in this subparagraph shall prohibit the board or  committee
    45  from  requesting that the person who is subject to the complaint present
    46  information as background or answer questions at a  committee  or  board
    47  meeting  prior  to  the commencement of deliberations or voting relating
    48  thereto; and
    49    (D) A requirement that a copy of the  policy  be  distributed  to  all
    50  trustees,  officers,  employees and volunteers, with instructions on how
    51  to comply with the procedures set forth in the policy. For  purposes  of
    52  this  subdivision, posting the policy on the corporation's website or at
    53  the corporation's  offices  in  a  conspicuous  location  accessible  to
    54  employees  and volunteers are among the methods a corporation may use to
    55  satisfy the distribution requirement.

        S. 7913--B                         10
 
     1    § 20. Severability. If any clause,  sentence,  paragraph,  section  or
     2  part  of  this act shall be adjudged by any court of competent jurisdic-
     3  tion to be invalid, the judgment shall not affect, impair, or invalidate
     4  the remainder thereof, but shall be confined in  its  operation  to  the
     5  clause,  sentence,  paragraph, section or part thereof directly involved
     6  in the controversy in which the judgement shall have been rendered.
     7    § 21. This act shall take effect on  the  one  hundred  eightieth  day
     8  after it shall have become a law; provided, however, that the amendments
     9  to  paragraph  (f)  of section 713 of the not-for-profit corporation law
    10  made by section six of this act shall take effect on the same  date  and
    11  in the same manner as section 132 of chapter 549 of the laws of 2013, as
    12  amended, takes effect.
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