“Key Persons” Added To Several NPCL Provisions

November 18, 2019


On November 8, 2019, the New York State Legislature passed an amendment to the Not-for-Profit Corporation Law (“NPCL”), which took effect immediately, adding “key persons” to the list of persons to whom certain provisions in the law apply. Therefore, New York Not-for-Profit corporations may need to revise their corporate bylaws and certain policies, including conflict of interest and whistleblower policies.

Key person(s) means any person, other than a director or officer, whether or not an employee of the corporation, who (i) has responsibilities, or exercises powers or influence over the corporation as a whole similar to the responsibilities, powers, or influence of directors and officers; (ii) manages the corporation, or a segment of the corporation that represents a substantial portion of the activities, assets, income or expenses of the corporation; or (iii) alone or with others controls or determines a substantial portion of the corporation’s capital expenditures or operating budget.

The existing provisions that are applicable to directors and officers and were expanded to include key persons are summarized and listed in part below:

  • Section 715(b) requiring Corporations to have a whistleblower policy; key persons are included in the list of persons protected from retaliation arising from the reporting of suspected improper conduct, and the corporation’s whistleblower policy must now also be distributed to key persons.
  • Section 716 covering loans to directors and officers; adds key persons to the list of persons to whom the corporation is prohibited from making loans.
  • Section 717 detailing the standard of conduct and duty of care for officers and directors of a corporation; key persons are held to the same standard of conduct and duty of care.
  • Section 718 regarding the list of directors and officers to be made available to members and creditors; includes key persons in the list of persons to be identified as a result of a written demand for such list.
  • Section 720(a) covering the limitation of liability for certain directors and officers; such limitation of liability includes key persons.

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Should you have any questions regarding the above, please contact the Garfunkel Wild attorney with whom you regularly work.