The NYS non-Profit revitalization act November 2015

Committees Generally Committees: Eliminates standing v. special committee distinction Retains distinction between committees of the board (board members only) Committees of the corporation (non-board members permitted to serve) – advisory only Chair restriction: Employee may not serve as chair of the Board – delayed effective date until January 1, 2017.

Real Property Transactions Old Law Purchase, sale, mortgage or lease of any real property required approved 2/3 approval of entire Board, unless 21 or more directors, then majority of entire New Law Purchase, sale, mortgage, lease, exchange or other disposition can be delegated to committee unless real property that is, or would upon acquisition, be all or substantially all of the assets (still required approval of 2/3 of entire Board) Only applies to sale, mortgage, lease, exchange or other disposition of the organization’s real property

Electronic Communications Old Law Members notice by mail, in person or by publication (more than 500 members) Board meeting notice by any manner provided in By-laws New Law Member meeting notice by e-mail and fax, note requirements for non-delivery Publication now includes posting on organization website

Audit: Committee Old Law: No NYS requirement; IRS suggests but does not require New Law: Staged NYS requirements tied to charitable solicitation registration Committee of the Board Independence standard for committee members Volunteer fire/ambulance companies exempt from charitable solicitation registration unless paid professional fundraiser used

Governance: Conflict of Interest Policy All nonprofits impacted No specific form of policy required Annual statements required Required provisions Define conflict of interest Disclosure procedures Related party cannot be part of deliberations Documentation Policy adopted and overseen by “independent directors” Existing policies that are substantially consistent

Governance: Related Party Transactions Related Party defined - incorporates Code Section 4958 for key employees Process prescribed Disclose material facts of relationship Related party absent from discussions and vote Board or independent board committee approval Standard Transaction fair, reasonable and in best interests Consideration of alternative transactions for charities Attorney General authority to bring action to enjoin or rescind

Governance: independent directors Directors who:  (a) are not, and have not been within the last three (3) years, compensated as an officer or employee of the Corporation or an Affiliate; (b) do not have a relative who is, or has been within the last (3) years, a “key employee” of the Corporation or an Affiliate;  

Governance: independent directors (con’t) (c) have not received, or had a relative who received, total compensation exceeding $10,000 in any of the last three (3) fiscal years from the Corporation or an Affiliate (excludes reimbursement for expenses reasonably incurred or reasonable compensation for service as a director pursuant to New York Not-for-Profit Corporation Law Section 202(A)); (d) is not a current employee of or does not have a substantial financial interest, or does not have a relative who is a current officer or has a substantial financial interest, in an organization that made payments to, or received payments from, the Corporation or an Affiliate for property or services exceeding the lesser of $25,000 or 2% of such organization’s consolidated gross revenues in any of the last three (3) fiscal years(payment does not include charitable contributions).  

Governance: Whistleblower Policy 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 laws may suffice

Q & A Anita Pelletier Nixon Peabody LLP 1300 Clinton Square Rochester, NY 14604 585-263-1164 apelletier@nixonpeabody.com