STATE OF NEW YORK
________________________________________________________________________
6994
IN SENATE
March 4, 2010
___________
Introduced by Sen. VALESKY -- read twice and ordered printed, and when
printed to be committed to the Committee on Corporations, Authorities
and Commissions
AN ACT to amend the business corporation law, in relation to profes-
sional service corporations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 1501 of the business corporation law is amended by
2 adding a new paragraph (f) to read as follows:
3 (f) "Eligible employee stock ownership plan" means an employee stock
4 ownership plan as defined in section 4975(e)(7) of the internal revenue
5 code of 1986, as amended, sponsored by a professional service corpo-
6 ration or a foreign professional service corporation and with respect to
7 which:
8 (i) All of the voting trustees of the employee stock ownership plan
9 are individuals who are authorized by law to practice in this state a
10 profession which such corporation is authorized to practice and who are
11 or have been engaged in the practice of such profession in such corpo-
12 ration or a predecessor entity, or who will engage in the practice of
13 such profession in such corporation within thirty days of the date such
14 individual is appointed trustee; however, if a conflict of interest
15 exists for one or more trustees with respect to a specific issue or
16 transaction, such trustees may appoint an independent trustee or special
17 fiduciary, who is not authorized by law to practice in this state a
18 profession which such corporation is authorized to practice, but such
19 independent trustee or special fiduciary shall be authorized to make
20 decisions only with respect to the specific issue or transaction that is
21 the subject of the conflict; and
22 (ii) The employee stock ownership plan provides that no shares, rights
23 or options to purchase shares of the corporation shall at any time be
24 issued, sold, or otherwise transferred directly to anyone other than an
25 individual duly authorized by law to practice in this state a profession
26 which such corporation is authorized to practice, unless such shares are
27 transferred as a plan distribution to a plan participant or beneficiary
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD10985-01-9
S. 6994 2
1 and subject to immediate repurchase by the professional corporation, the
2 employee stock ownership plan or another person authorized under this
3 article to hold such shares.
4 § 2. Section 1507 of the business corporation law, as amended by chap-
5 ter 1022 of the laws of 1971, is amended to read as follows:
6 § 1507. Issuance of shares.
7 A professional service corporation may issue shares only to an eligi-
8 ble employee stock ownership plan or to individuals who are authorized
9 by law to practice in this state a profession which such corporation is
10 authorized to practice and who are or have been engaged in the practice
11 of such profession in such corporation or a predecessor entity, or who
12 will engage in the practice of such profession in such corporation with-
13 in thirty days of the date such shares are issued. No shareholder of a
14 professional service corporation shall enter into a voting trust agree-
15 ment, proxy, or any other type agreement vesting in another person,
16 other than another shareholder of the same corporation or a person who
17 would be eligible to become a shareholder if employed by the corpo-
18 ration, the authority to exercise voting power of any or all of his
19 shares. All shares issued, agreements made, or proxies granted in
20 violation of this section shall be void.
21 § 3. Section 1511 of the business corporation law, as amended by chap-
22 ter 1022 of the laws of 1971, is amended to read as follows:
23 § 1511. Transfer of shares.
24 No shareholder of a professional service corporation may sell or
25 transfer his shares in such corporation except to another individual who
26 is eligible to have shares issued to him by such corporation [or except]
27 in trust to another individual who would be eligible to receive shares
28 if he were employed by the corporation, or to an eligible employee stock
29 ownership plan. Nothing herein contained shall be construed to prohibit
30 the transfer of shares by operation of law or by court decree. No trans-
31 feree of shares by operation of law or court decree may vote the shares
32 for any purpose whatsoever except with respect to corporate action under
33 section nine hundred nine and section one thousand one. The restriction
34 in the preceding sentence shall not apply, however, where such transfer-
35 ee would be eligible to have shares issued to him if he were an employee
36 of the corporation and, if there are other shareholders, a majority of
37 such other shareholders shall fail to redeem the shares so transferred,
38 pursuant to section 1510, within sixty days of receiving written notice
39 of such transfer. Any sale or transfer, except by operation of law or
40 court decree or except for a corporation having only one shareholder,
41 may be made only after the same shall have been approved by the board of
42 directors, or at a shareholders' meeting specially called for such
43 purpose by such proportion, not less than a majority, of the outstanding
44 shares as may be provided in the certificate of incorporation or in the
45 by-laws of such professional service corporation. At such shareholders'
46 meeting the shares held by the shareholder proposing to sell or transfer
47 his shares may not be voted or counted for any purpose, unless all
48 shareholders consent that such shares be voted or counted. The certif-
49 icate of incorporation or the by-laws of the professional service corpo-
50 ration, or the professional service corporation and the shareholders by
51 private agreement, may provide, in lieu of or in addition to the forego-
52 ing provisions, for the alienation of shares and may require the redemp-
53 tion or purchase of such shares by such corporation at prices and in a
54 manner specifically set forth therein. The existence of the
55 restrictions on the sale or transfer of shares, as contained in this
56 article and, if applicable, in the certificate of incorporation,
S. 6994 3
1 by-laws, stock purchase or stock redemption agreement, shall be noted
2 conspicuously on the face or back of every certificate for shares issued
3 by a professional service corporation. Any sale or transfer in
4 violation of such restrictions shall be void.
5 § 4. Paragraph (d) of section 1525 of the business corporation law, as
6 added by chapter 505 of the laws of 1983, is amended to read as follows:
7 (d) "Foreign professional service corporation" means a professional
8 service corporation, whether or not denominated as such, organized under
9 the laws of a jurisdiction other than this state, all of the sharehold-
10 ers (including the trustees of an eligible employee stock ownership
11 plan, if applicable), directors and officers of which are authorized and
12 licensed to practice the profession for which such corporation is
13 licensed to do business; except that all shareholders, directors and
14 officers of a foreign professional service corporation which provides
15 health services in this state shall be licensed in this state.
16 § 5. Section 1531 of the business corporation law, as amended by chap-
17 ter 538 of the laws of 2001, is amended to read as follows:
18 § 1531. Annual statement.
19 Each foreign professional service corporation shall, at least once
20 [of] each year on or before the date prescribed by the licensing author-
21 ity, furnish a statement to the licensing authority listing the name and
22 residence address of each shareholder (including the trustees of an
23 eligible employee stock ownership plan, if applicable), director, offi-
24 cer and corporate employee licensed by such licensing authority and
25 certifying that such individuals intending to practice a profession
26 which such foreign professional service corporation is authorized to
27 practice in this state are licensed to practice said profession in this
28 state. In the case of a foreign professional service corporation provid-
29 ing health services, such statement shall also certify that each share-
30 holder, officer and director of the corporation is licensed to practice
31 said profession in this state. The statement shall be signed by the
32 president or any vice-president of the corporation and attested to by
33 the secretary or any assistant secretary of the corporation.
34 § 6. This act shall take effect immediately.
