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NY Not-For-Profit Modernization Act Further Expands The Ability of Not-For-Profits and Religious Corporations to Conduct Business Electronically

Building on the previous expansion granting Not-For-Profits and Religious Corporations permanent permission to hold meetings virtually, the NY Not-For-Profit Modernization Act further expands electronic participation in corporate meetings and aligns the law with the common practices of the Not-For-Profit and religious sector with specific changes to N-PCL Sections 614, 705, and 708. These changes are effective as of November 21, 2022.

 

Other Electronic Means (N-PCL Sections 614 and 708)

Under the N-PCL and unless prohibited by an entity’s corporate documents, any action which may be undertaken by a vote of the members [congregation] or the board of directors may be conducted without a meeting if all directors or members agree in writing. Prior to the NY Not-For-Profit Modernization Act, such consent needed to be either in writing or by means of electronic mail (e.g., by sending an email where in the body of the email consent to the action is provided).  The NY Not-For-Profit Modernization Act expands the methods beyond just electronical mail to “electronic mail and other electronic means,” which permits members and board members to vote using poll tools or text message, so long as the consent can reasonably be determined as authorized by the individual.

Terms of Replacement Directors (N-PCL Section 705)

The NY Not-For-Profit Modernization Act also changed how a vacant director position may be filled with a replacement director. N-PCL Section 705 previously limited the replacement director’s term to the next annual meeting of the corporation. Replacement directors may now serve the full remaining term of the directorship which they were elected to or a term which ends on the date of an annual meeting as determined by the other members of the board subject to the restrictions of law and the corporate documents of the entity.

Quorum and Director Conflicts (N-PCL Section 708)

The last change of the act is the wording of N-PCL Section 708, so that members of the board of directors who must recuse themselves from a vote due to a conflict of interest or related party transaction still count in determining if there was a quorum present at the meeting. Significantly, this means that recused directors may attend to help establish a quorum but no longer count for purposes of determining the number of affirmative votes necessary for a board action.

Please contact WMcManus@cbmslaw.com for questions regarding this update.