The New York Not-for-Profit Corporation Law requires the certificate of incorporation to provide a specific purpose or purposes. If the purposes, as set forth in the proposed certificate, are not clear and concise, but are of a vague and/or general nature, the filing will be rejected.
Helpful Tips for Drafting a New York Not-for-Profit Purpose
Consent Requirements
Note that Section 404 of the New York NPCL provides that corporations formed for certain purposes require consent from another governmental agency and written consent or approval must be attached to the certificate before submission to the Department of State for filing. Reviewing this section to determine whether any consents or approvals are required will help you avoid surprises and unexpected delays.
Purposes Must Be Consistent with Type of Not-for-Profit
Be sure that the purposes are consistent with the “Type.” Not-for-profit corporations are of one of the following types:
IRS Tax Exempt Language
It is fairly common for the purpose clause of a not-for-profit corporation to begin with the following or similar language and many examples of this are on file:
“The purposes for which the corporation is organized [and shall be operated are exclusively charitable within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and] are to…”
The New York Department of State, however, has modified its views regarding this particular point and the language, as stated above, is no longer acceptable. It will prompt a rejection letter asking if the material, as bracketed by the Department, is IRS tax exempt language or is intended to be a purpose and will go on to state that if it is IRS tax exempt language, it must be labeled as such and be removed from the purpose clause, and, if it is a purpose, it is unacceptably vague.
By keeping these important points in mind when drafting the articles of incorporation for a New York not-for-profit, you can significantly reduce the chances that your filing will be rejected and delayed because of a problem with the purpose clause.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.