new york's nonprofit revitalization act: what changed & what you need to do
TRANSCRIPT
THE NONPROFIT REVITALIZATION ACT: NEXT STEPS FOR NY NOT-FOR-PROFITS
MICHAEL J. COONEY, PARTNER ANITA L. PELLETIER, COUNSEL
JANUARY 7, 2014
SPEAKERS
Michael J. Cooney
Partner, Exempt Organizations
New York, NY
Rochester
(212) 224-7343
(585) 263-1534
Anita L. Pelletier
Counsel, Exempt Organizations
Rochester, NY
(585) 263-1164
2
OUTLINE
Perspectives on the new statute
Specific requirements of the law
What next?
SOME PERSPECTIVE
Membership Corporations Law 1895
Not-for-Profit Corporation Law 1970
NYSBA Proposal May 2007
AG’s Leadership Committee on Nonprofit
Revitalization February 2012
Nonprofit Revitalization Act
/Executive Compensation Reform Act
THE NONPROFIT CONTINUUM
Charities
Federal Government
State and Local
Unions
Social Clubs Trade
Associations
Business Corporation, Partnership,
Limited Liability Company
Quasi-
governmental
OUTLINE
Perspectives on the new statute
Specific requirements of the law
What next?
TWO GENERAL PURPOSES
Reducing unnecessary and outdated burdens on
nonprofits
Enhancing nonprofit oversight and governance to
prevent fraud and improve public trust
Generally effective July 1, 2014, but check individual
requirements on their application
THE DEMISE OF “TYPES”
Type A
civic, patriotic, political, social,
fraternal, athletic, agricultural,
horticultural, animal husbandry,
association (professional,
commercial, industrial, trade or
service)
Type B
charitable, educational, religious,
scientific, literary, cultural, prevention
of cruelty to children or animals
Type C
any lawful business purpose to
achieve a lawful public or quasi-
public objective
Type D
formation is authorized by
any other corporate
law for any purpose,
business or non-business,
pecuniary or non-pecuniary
THE DEMISE OF “TYPES”
Charitable
Non-charitable
GENERAL GOVERNANCE
Definition of “entire Board”
Committee practice
— Committees of the Board
— Committees of the corporation
CEO and other employees prohibited from also
serving as Board chair
Electronic communication and meeting options
Dealing with real estate
AUDIT OVERSIGHT
Trigger for specific audit oversight requirements
— Tied to charitable solicitation registration
— $500,000 in gross revenue and support
Performed by Board or an audit committee
— Definition of independence
Specific tasks, such as . . .
— Retain outside auditor annually
— Review audit and management letter
— $1M threshold—additional requirements
RELATED PARTY TRANSACTIONS
Definition of related party
Process
— Disclose material facts of relationship
— Absent from discussions and vote
— Board approval
Standard
— Transaction fair, reasonable and in best interests
— Additional, higher standard for charities
AG power to bring action to enjoin or rescind
CONFLICTS OF INTEREST
All nonprofits affected
No particular form of policy
Impacts directors/trustees, officers, and key employees
Annual statements required
Required provisions
— Define conflict of interest
— Disclosure procedures
— Not present for deliberation or vote;
no improper influence
— Documentation
WHISTLEBLOWERS
Nonprofits affected
—twenty or more employees
—annual revenue in excess of $1 million in prior fiscal year
Contents
— System to report potential illegality, fraud or violation of
any adopted policy of the corporation
— Prohibit retaliation
Distribution to all directors/trustees, officers, employees
and volunteers who provide substantial services to the
corporation
Compliance with other standards will suffice
OUTLINE
Perspectives on the new statute
Specific requirements of the law
What next?
TAKING CHARGE
Review and amend
—Certificate of Incorporation/Trust Agreement
—By-laws
—Board policies
Watch for further legislative changes
Contact us at
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©2014. Nixon Peabody LLP. All rights reserved.
Michael J. Cooney Partner New York 212-224-7343 Rochester 585-263-1534 [email protected]
Anita L. Pelletier Counsel Rochester 585-263-1164 [email protected]
QUESTIONS?