On December 18, 2013, Governor Cuomo signed into law the Non-Profit Revitalization Act of 2013 (“the Act”). The Act represents the first major overhaul of New York’s nonprofit laws in more than 40 years. Its’ goal is to update governance, oversight, formation and the administration of nonprofit organizations in the state of New York. Most of the Act’s provisions will go into effect on July 1, 2014.
Among the many changes made to the Not-For-Profit Corporation Law, following is a brief summary of some of the significant changes:
Elimination of Letter Categories
Prior to the passing of the Act not-for-profit corporations were formed as either type A, B, C or D corporations. The Act eliminates the letter designations and simplifies the categories into two: “charitable” and “non-charitable”. As of July 1, 2014, all existing A corporations will be considered non-charitable corporations, all existing type B or C corporations will be considered charitable and all existing type D corporations will be considered charitable only if the corporation has a “charitable purpose”. Any corporation that has both charitable and non-charitable purposes will be considered a charitable corporation.
Real Estate Transactions
The Act changes voting requirements for approval of real property transactions depending on whether such transactions involve all or substantially all of a nonprofit corporation’s assets. Under the current law, a two-thirds vote of the entire board is required to approve ordinary real estate transactions for nonprofits with fewer than 21 directors. The Act makes it easier to approve such transactions by only requiring a majority vote of the directors to approve the transaction. The two-thirds voting requirement however will still continue for transactions involving all or substantially all of the nonprofit corporation’s assets, unless the corporation has more than 20 directors, in which case only a majority is required.
Approval for Major Transactions
The Act allows a non-profit corporation seeking to sell, lease, exchange or dispose of all or substantially all of its assets to seek approval directly from the attorney general without the requirement of court approval. However, nonprofits continue to have the right to seek court approval for a transaction should they wish to do so.
Paragraph (a) Section 2-b of the Religious Corporation law states: “If any provision of the not-for-profit corporation law conflicts with any provision of this chapter, the provision of this chapter shall prevail and the conflicting provision of the not-for-profit corporation law shall not apply in such case. If any provision of this chapter relates to a matter embraced in the not-for-profit corporation law but is not in conflict therewith, both provisions shall apply.”
Per Section 12(1) of the Religious Corporation Law, court approval is still required when a religious corporation sells, mortgages or enters into a lease for a term exceeding five years. The rule applies even if the religious corporation’s real property does not constitute all or substantially all of its assets. However, court approval is not required if a religious corporation is executing a purchase money mortgage.