N.Y. Changes Nonprofit Governance Voting, Board Practices Law
N.Y. Changes Nonprofit Governance Voting, Board Practices Law

A recently enacted New York State law amends previous rules governing nonprofits. Under the newly-enacted changes, nonprofit leaders may conduct votes without holding meetings with the consent of their members. The new law additionally modifies the terms served by directors appointed to fill vacancies and clarifies quorum requirements.

Under the new law, whenever nonprofit members are to take a vote, the vote may be held without a meeting upon the consent of all voting members. The revised law expands consent to include all electronic means. Consent previously would have had to have been physically written or given through email.

“As NFPs started to make decisions and hold votes electronically, there were new platforms and software that had arisen for decision-making and with voting tools which are more efficient for organizations,” Assembly member Amy Paulin (D-Scarsdale), who introduced the bill, wrote in an email to The NonProfit Times. “The statute, however, hadn’t authorized the use of these additional platforms and services as the language was limited to making decisions and holding votes by email or in person. As a result, the provision was a necessary and important change to help NFPs.”

Additionally, the elected or appointed directors may serve until the end of the term they were appointed to fill, or for a term that ends at an annual meeting, subject to limitations on terms in office. Nonprofit directors elected or appointed to fill vacancies previously would only be permitted to serve until the next annual meets at which election of directors was part of the regular order of business, unless otherwise specified in the nonprofits’ certificate of incorporation or bylaws.

Changing the board election requirements in the event of vacancies gives nonprofit leadership more flexibility in balancing their board classes while helping avoid having to host multiple elections in a short time period, according to Paulin.

The revisions also loosen the qualifications for what constitutes a quorum. Under the new terms, “[T]he vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the board. Directors who are present at a meeting but not present at the time of a vote due to a conflict of interest or related party transaction shall be determined to be present at the time of the vote for purposes of determining if a quorum is present at such time.”

The bill codifies the idea that board members who have to leave a meeting because of a conflict are still counted toward a quorum.

The changes were the result of a decade of consideration, including consultation with New York City-based nonprofit coalition Nonprofit New York, according to Paulin. “Their points made a lot of sense, and from then on I worked together with them on the bill,” Paulin wrote. “That was really the starting point for the revisions.”

Movement on the changes slowed during the Covid-19 pandemic, just as the crisis underscored the need for greater flexibility on behalf of nonprofit leadership. “Our NYS not-for-profits have struggled during and since the pandemic,” Paulin wrote. “The changes will help these institutions, which are some of the ones that need the help the most.”

Representatives from Lawyers Alliance for New York and Nonprofit New York lobbied New York Governor Kathy Hochul in support of the changes. Hochul also received more than 200 emails from a variety of supporters. Hochul signed the Not-For-Profit Corporation Law Modernization Act.