Part 2 – Domestic and Foreign Not-For-Profit Corporations
New York's Not-For-Profit Corporation Law (NPCL) contains essentially the same listing of restricted words previously noted in Part 1 of this article , which dealt with obtaining consent from the New York Commissioner of Education for domestic and foreign business entities. Keep in mind, however, that even not-for-profit corporations whose names do not contain restricted words may have a purpose or purposes considered by the Department of State to require Education Department consent when filings are submitted. (Note that not-for-profits in New York cannot have an all-purpose clause.) Secondary or incidental purposes such as providing training and/or instruction and holding classes, seminars and lectures may trigger the same response.
When is a Corporate Ending Required?
Also to be considered, in addition to the purpose issue, is whether or not a corporate name requires a corporate ending, as name, purposes and type are closely intertwined and may affect each other in unanticipated ways. (See Incorporating a New York Not-For-Profit Corporation: Purpose Problem)
Section 301(a)(1) of the NPCL indicates that the name of a domestic or foreign corporation:
Shall, unless the corporation is formed for charitable or religious purposes, or for purposes for which the approval of the commissioner of social services or the public health and health planning council is required, or is a bar association, contain the word “corporation”, “incorporated” or “limited” or an abbreviation of one such words; or, in the case of a foreign corporation, it shall, for use in this state, add at the end of its name one of such words or an abbreviation thereof.[i]
If the purposes of a corporation require Education consent then they are not considered strictly charitable as there is an educational aspect and the name will need a corporate ending. So, in general, any corporation requiring education consent will also need a corporate ending. Delays will occur if Education issues a consent without a corporate ending and the Department of State rules that one is needed as the name of the corporation must be identical throughout the document and all official attachments.
Types of Organizations That Must Be Chartered by the Board of Regents
In general, the following types of organizations must be chartered by the Board of Regents and cannot be filed with the New York Department of State:
- a college, university or other institution of higher education
- a nursery, elementary, secondary or charter school
- a library, archives, museum or historical society with collections
- a public television or public radio station
As previously discussed in Part 1 of this article, entities with educational purposes that do not require a Regents charter may be filed with the Department of State with the prior consent of the Commissioner of Education.
Activities Requiring Consent From the Education Department
New York not-for-profit Corporations whose activities involve the following will always need Education Department consent:
- Alumni associations, booster clubs and “Friends of “ organizations
- Historical societies
- Historical preservation
- Medical research
- Promoting or fostering the arts in any way
In connection with the last item above (promoting or fostering the arts in any way), the following is an example of how one aspect of this process can affect another… Operating a theater, producing and/or performing plays, giving concerts and readings and holding dance reviews and art exhibitions would all be defined as “fostering the arts” and a not-for-profit corporation engaged in any of these activities would need Commissioner of Education consent and a corporate ending. Moreover, all of these activities are considered business purposes and would result in the corporation to be classified as a Type C corporation (See Incorporating a New York Not-For-Profit Corporation: Purpose Problem). A corporation of this type would also have to set forth a public or quasi-public objective separate and apart from its purpose clause.
Tips to Keep in Mind When Drafting New York Not-For-Profit Documents
When drafting the documents for a New York not-for-profit, if it is possible you will need Education Department consent, keep the following in mind:
- Submit the filing to the Department of State as a first step as it is important that the proposed purposes be acceptable to the filing office before submitting the document to the Education Department.
- Be as specific as possible with the purpose clause. Doing so will give the staff at the Education Department greater insight as to the activities being pursued and can quite possibly shorten processing time.
For both business and not-for-profit entities, obtaining consent from the Commissioner of Education prior to filing can be a complicated and time-consuming process. You can avoid delays and unpleasant surprises by keeping in mind the words and activities that trigger the requirement for Education consent, knowing when corporate endings are required and by avoiding all-purpose clauses. Hopefully, the information provided in this two-part article will make the process easier for you.
[i] New York Not-For-Profit Corporation Law § 301(a)(1)
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.