Benefit Corporations
In allowing the formation of benefit corporations in Senate Bill 79-A, New York joins California, Hawaii, Maryland, New Jersey, Vermont and Virginia, which have all passed laws creating this entity type. Benefit corporations are designed to allow for-profit corporations to promote goals which create a material positive impact on society and specific public benefits without risking claims by disgruntled shareholders that they are not fulfilling their fiduciary responsibilities by pursuing an objective that diminishes financial return.
In New York State, Article 17 has been added to the New York Business Corporation Law. This article provides that:
View the full text of Senate Bill 79-A.
Design Professional Service Corporations
The amendments to Article 1500 of the Business Corporation Law contained in Senate Bill 2987 create a new type of entity, the design professional corporation. These entities are unique in that they can practice one or more* professions in the fields of architecture, engineering and design and are allowed to issue shares to employees who are not licensed professionals. The justification provided for the change is to permit design firms the flexibility of offering an ownership interest in the corporation to their employees who are not licensed professionals, bringing the practice in New York in line with other states and allowing New York to be more competitive both nationally and internationally.
A number of restrictions have been imposed to ensure that professionals maintain ownership, management and control of the entity:
The new statute also stipulates that a certificate of incorporation of a design professional service corporation shall also have attached a Certificate from the Department of Education certifying that each of the shareholders, officers, directors and owners has been deemed to have been of good moral character as may be established by the regulations of the Commissioner of Education.
When the Office of the Professions was asked how this was to be established, especially for non-professionals, they indicated that they were not yet sure what procedures would apply. Currently Regulation 28 of the Rules of the Board of Regents provides procedures for establishing “good moral character” for licensed professionals, but it is unknown if these regulations will apply to design professional service corporations.
The names of these corporations must end in either the words “Design Professional Corporation” or D.P.C. There are no provisions which allow an existing professional corporation to convert into a design professional corporation. A design professional corporation can merge with a professional corporation if the professional corporation practices one of the design professions.
View the full text of New York Senate Bill 2987.
*Other than these corporations, no professional service corporation may be formed to practice more than one of the other professions unless it is a single-shareholder Professional Corporation where the only shareholder is licensed in more than one profession.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.