CORPORATE TRANSACTIONS & COMPLIANCE BLOG

New York’s Nonprofit Revitalization Act Signed into Law

By: Ron Barrett, COGENCY GLOBAL INC. on Mon, Jan 06, 2014

New York NonprofitOn December 18, 2013, New York Governor Andrew Cuomo signed Assembly Bill 8072, the Nonprofit Revitalization Act of 2013, into law. The act represents the first major overhaul of laws governing New York nonprofits in 40 years. The new law allows nonprofits to more easily incorporate, dissolve and merge; communicate and hold meetings using modern technology such as Skype and videoconferencing if their Articles of Incorporation and bylaws so allow and enter into transactions without having to go to court. The bill includes essential oversight and governance reforms that will help protect taxpayer dollars and preserve public trust, and requires the adoption of robust financial oversight, whistleblower and conflict-of-interest policies. Most of the provisions of the law are effective July 1, 2014, the highlights of which were succinctly summarized in the announcement released by New York’s Attorney General, Eric Schneiderman:

Summary of the Nonprofit Revitalization Act of 2013

The Nonprofit Revitalization Act brings reform in two main areas:

  • Enhancing nonprofit governance and oversight to prevent fraud and improve public trust; and
  • Reducing unnecessary and outdated burdens on nonprofits.

The Nonprofit Revitalization Act gives New York the strongest nonprofit governance regime in the country.  The law:

  • Ensures sound financial management by requiring that charities’ boards perform active oversight over financial audits.  Boards will be responsible for retaining independent auditors and reviewing results of the audit. At larger charities (over $1 million in annual revenue), the board or audit committee will be required to follow additional oversight procedures.
  • Prevents conflicts of interest by requiring that transactions between a nonprofit and insiders who stand to benefit be fully disclosed and that nonprofit boards determine they are fair, reasonable, and in organizations’ best interests.  When a charity engages in a substantial transaction with an insider, the board will have to consider alternatives and document its basis for choosing the insider transaction.
  • Strengthens the Attorney General’s power to police fraud and abuse by granting clear power to bring judicial proceedings to unwind interested-party transactions.
  • Ensures board independence by prohibiting any employee of a nonprofit from also serving as chair of its board.
  • Promotes good governance by requiring all nonprofits to adopt conflict of interest policies and those with over $1 million in annual revenue and 20 or more employees to adopt whistleblower policies.

The Nonprofit Revitalization Act also streamlines and modernizes New York law to remove unnecessary burdens, save taxpayer dollars and help nonprofits focus resources on providing services by:

  • Streamlining procedures for nonprofit mergers, property sales and corporate dissolutions, so that funds needed for ongoing charitable programs are not wasted on unnecessary red tape;
  • Modernizing laws to allow nonprofits to conduct their affairs more efficiently, such as permitting nonprofits to use email and video technology for meetings and allowing boards to delegate the approval of small transactions to committees; and
  • Eliminating unnecessary and costly requirements for nonprofits forming in New York, saving nonprofits money and time and allowing them to commence charitable programs more quickly.

For more information, view the full text of the Nonprofit Revitalization Act and the New York Attorney General’s press release.

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Nonprofit Registration and Compliance