The New York Nonprofit Revitalization Act of 2013

Sullivan & Cromwell LLP - December 20, 2013

On December 18, 2013, Governor Cuomo signed into law the New York Nonprofit Revitalization Act of 2013 (the “Act”), which makes significant changes to the New York Not-for-Profit Corporation Law (the “N-PCL”), the Estates Powers & Trusts Law (the “EPTL”), and Article 7-A of the Executive Law (“Article 7-A”), among others, intended to simplify and improve the efficiency of administrative procedures for nonprofit organizations and to strengthen nonprofit governance and oversight, effective July 1, 2014. The Act applies to any nonprofit organization that is incorporated in New York or operates or solicits charitable contributions in New York. The text of the Act is based on recommendations made by the Leadership Committee for Nonprofit Revitalization convened by the Office of the New York Attorney General after gathering input from nonprofit leaders, legal and accounting practitioners, and government officials, with critical consideration of a number of antiquated provisions and procedures. The Act is the first substantial overhaul of New York’s nonprofit laws in more than 40 years. This memorandum discusses key aspects of the Act relating to (i) changes in the reporting requirements applicable to charitable organizations required to register under Article 7-A; (ii) several express grants to the Attorney General of additional authority to enforce the laws governing nonprofit organizations; (iii) the simplification of the N-PCL and processes considered to be outdated or burdensome to nonprofit corporations or which act as barriers to entry for early-stage organizations; and (iv) increased requirements for governance policies and controls to ensure continued public trust in New York charitable corporations and trusts.

Nonprofit and charitable organizations will need to review existing internal controls, by-laws, policies, and committee charters, if any, to ensure that the changes introduced by the Act are appropriately implemented. Specifically, and as described in more detail below, nonprofit corporations and charitable trusts formed or conducting activities in New York, regardless of value of assets or type of activities, must have in place a conflict of interest policy. In some circumstances such organizations must adopt whistleblower policies. Corporate by-laws and charitable trust operating procedures must reflect the strengthened oversight requirements for audit oversight and related party transactions, and organizations required to register under Article 7-A should be aware of the changed reporting requirements. Finally, nonprofit corporations should ensure that their by-laws comply with, and may wish to avail themselves of, certain of the changes to the N-PCL made by the Act, including provisions relating to voting requirements, board committees, and electronic communications.