S T A T E O F N E W Y O R K
________________________________________________________________________
433
2019-2020 Regular Sessions
I N A S S E M B L Y
(PREFILED)
January 9, 2019
___________
Introduced by M. of A. PAULIN, SEAWRIGHT -- read once and referred to
the Committee on Corporations, Authorities and Commissions
AN ACT to amend the not-for-profit corporation law, in relation to the
regulation of key persons
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Paragraph (a) and subparagraph 4 of paragraph (b) of
section 715-b of the not-for-profit corporation law, as amended by chap-
ter 466 of the laws of 2016, are amended to read as follows:
(a) Except as provided in paragraph (c) of this section, the board of
every corporation that has twenty or more employees and in the prior
fiscal year had annual revenue in excess of one million dollars shall
adopt, and oversee the implementation of, and compliance with, a whist-
leblower policy to protect from retaliation persons who report suspected
improper conduct. Such policy shall provide that no director, officer,
KEY PERSON, employee or volunteer of a corporation who in good faith
reports any action or suspected action taken by or within the corpo-
ration that is illegal, fraudulent or in violation of any adopted policy
of the corporation shall suffer intimidation, harassment, discrimination
or other retaliation or, in the case of employees, adverse employment
consequence.
(4) A requirement that a copy of the policy be distributed to all
directors, officers, KEY PERSONS, employees and to volunteers who
provide substantial services to the corporation. For purposes of this
subdivision, posting the policy on the corporation's website or at the
corporation's offices in a conspicuous location accessible to employees
and volunteers are among the methods a corporation may use to satisfy
the distribution requirement.
§ 2. Section 716 of the not-for-profit corporation law, as amended by
chapter 549 of the laws of 2013, is amended to read as follows:
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD01660-01-9
A. 433 2
§ 716. Loans to directors [and], officers AND KEY PERSONS.
No loans, other than through the purchase of bonds, debentures, or
similar obligations of the type customarily sold in public offerings, or
through ordinary deposit of funds in a bank, shall be made by a corpo-
ration to its directors [or], officers OR KEY PERSONS, or to any other
corporation, firm, association or other entity in which one or more of
its directors [or], officers OR KEY PERSONS are directors [or], officers
OR KEY PERSONS or hold a substantial financial interest, except a loan
by one charitable corporation to another charitable corporation. A loan
made in violation of this section shall be a violation of the duty to
the corporation of the directors or officers authorizing it or partic-
ipating in it, but the obligation of the borrower with respect to the
loan shall not be affected thereby.
§ 3. Section 717 of the not-for-profit corporation law, paragraph (a)
as amended by chapter 490 of the laws of 2010 and paragraph (b) as
amended by chapter 734 of the laws of 1988, is amended to read as
follows:
§ 717. Duty of directors [and], officers AND KEY PERSONS.
(a) Directors [and], officers AND KEY PERSONS shall discharge the
duties of their respective positions in good faith and with the care an
ordinarily prudent person in a like position would exercise under simi-
lar circumstances. The factors set forth in subparagraph one of para-
graph (e) of section 552 (Standard of conduct in managing and investing
an institutional fund), if relevant, must be considered by a governing
board delegating investment management of institutional funds pursuant
to section 514 (Delegation of investment management) For purposes of
this paragraph, the term institutional fund is defined in section 551
(Definitions).
(b) In discharging their duties, directors [and], officers AND KEY
PERSONS, when acting in good faith, may rely on information, opinions,
reports or statements including financial statements and other financial
data, in each case prepared or presented by: (1) one or more officers or
employees of the corporation, whom the director believes to be reliable
and competent in the matters presented, (2) counsel, public accountants
or other persons as to matters which the directors [or], officers OR KEY
PERSONS believe to be within such person's professional or expert compe-
tence or (3) a committee of the board upon which they do not serve, duly
designated in accordance with a provision of the certificate of incorpo-
ration or the bylaws, as to matters within its designated authority,
which committee the directors [or], officers OR KEY PERSONS believe to
merit confidence, so long as in so relying they shall be acting in good
faith and with that degree of care specified in paragraph (a) of this
section. Persons shall not be considered to be acting in good faith if
they have knowledge concerning the matter in question that would cause
such reliance to be unwarranted. Persons who so perform their duties
shall have no liability by reason of being or having been directors
[or], officers OR KEY PERSONS of the corporation.
§ 4. Section 718 of the not-for-profit corporation law, as amended by
chapter 549 of the laws of 2013, is amended to read as follows:
§ 718. List of directors [and], officers AND KEY PERSONS.
(a) If a member or creditor of a corporation, in person or by his
attorney or agent, or a representative of the district attorney or of
the secretary of state, the attorney general, or other state official,
makes a written demand on a corporation to inspect a current list of its
directors [and], officers AND KEY PERSONS, the corporation shall, within
two business days after receipt of the demand and for a period of one
A. 433 3
week thereafter, make the list available for such inspection at its
office during usual business hours.
(b) Upon refusal by the corporation to make a current list of its
directors [and], officers AND KEY PERSONS available, as provided in
paragraph (a) of this section, the person making a demand for such list
may apply, ex parte, to the supreme court at a special term held within
the judicial district where the office of the corporation is located for
an order directing the corporation to make such list available. The
court may grant such order or take such other action as it may deem just
and proper.
§ 5. Section 720-a of the not-for-profit corporation law, as added by
chapter 220 of the laws of 1986, is amended to read as follows:
§ 720-a. Liability of directors, officers [and], trustees AND KEY
PERSONS.
Except as provided in sections seven hundred nineteen and seven
hundred twenty of this chapter, and except any action or proceeding
brought by the attorney general or, in the case of a charitable trust,
an action or proceeding against a trustee brought by a beneficiary of
such trust, no person serving without compensation as a director, offi-
cer, KEY PERSON or trustee of a corporation, association, organization
or trust described in section 501 (c) (3) of the United States internal
revenue code shall be liable to any person other than such corporation,
association, organization or trust based solely on his or her conduct in
the execution of such office unless the conduct of such director, offi-
cer, KEY PERSON or trustee with respect to the person asserting liabil-
ity constituted gross negligence or was intended to cause the resulting
harm to the person asserting such liability. For purposes of this
section, such a director, officer, KEY PERSON or trustee shall not be
considered compensated solely by reason of payment of his or her actual
expenses incurred in attending meetings or otherwise in the execution of
such office.
§ 6. This act shall take effect immediately.