1
Non-Profit Revitalization Act
By-Laws Review Checklist
(Posted in the NPCC Information Databank on May 2, 2014;
updated as of October 27, 2014 —
This checklist is provided with the understanding that the
Nonprofit Coordinating Committee of New York (NPCC)
is not rendering legal, accounting, or other professional advice or service.
Professional advice on specific issues should be sought from an
accountant, lawyer, or other professional.
Most provisions of the New York Non-Profit Revitalization Act (the “Revitalization Act”) will take effect on July 1, 2014. The Revitalization Act applies to New York non-profit corporations and, in certain cases, to New York charitable trusts, New York education corporations, and New York religious corporations.[1]
In advance of the effective date of the Revitalization Act, an organization should review its by-laws or other comparable governance documents to (i) ensure that they are compliant with the requirements of the New York Not-for-Profit Corporation Law (the “N-PCL”), as amended by the Revitalization Act, and (ii) if desired, revise such documents to allow the organization to take advantage of the new technologies and other modernizations embraced by the Revitalization Act.
This checklist is intended to assist an organization in the review of its by-laws in light of the amendments to the N-PCL effected by the Revitalization Act. It identifies certain revisions that an organization may wish to make, and, in certain circumstances, should make, to its by-laws in light of the Revitalization Act. However, each organization’s by-laws are different, and this checklist may not address each item that should be revised or reviewed in a particular organization’s by-laws.
Amendments made before July 1, 2014 to conform an organization’s by-laws to the Revitalization Act should only be effective on or after July 1, 2014.
Action / Explanation / Remove any references to corporate “type” (i.e., Type A, Type B, Type C or Type D) / Non-profit corporations, as of July 1, 2014, are classified as either charitable or non-charitable. Corporate “types” have been eliminated.[2]
Any reference to the classification of the corporation as a Type A, Type B, Type C or Type D non-profit corporation should be removed. If desired, the corporation’s classification as a charitable or non-charitable corporation may be included.[3] It is not necessary for the corporation’s classification to be included in the by-laws.
/ Update the definition of “entire board”; expand options for setting the size of the board / The N-PCL defines the term “entire board” to mean the total number of directors entitled to vote which the corporation would have if there were no vacancies.[4]
To ensure compliance with the N-PCL, which requires certain board actions to be authorized by a specified percentage of the entire board,[5] the by-laws should include the definition of “entire board.”
If the by-laws provide that the board will consist of a fixed number of directors, then the “entire board” is that number of directors. If the by-laws provide that the board will consist of a range between a minimum and maximum number of directors, then the “entire board” is the number of directors within that range that were elected as of the most recently held election of the directors (including directors holding-over). If the by-laws give the members (in the case of a corporation with members) or the board the ability to fix the size of the board, then the “entire board” is the number so fixed.[6]
The by-laws should (i) include a fixed number of directors; (ii) include a range between a minimum and maximum number of directors that is appropriate for the particular corporation; or (iii) simply provide that the members or the board will set the size of the board (with, or without, maximums and minimums).[7] In any case, the board must consist of at least three directors.[8]
/ Expand permitted means of providing notices of meetings of the board; waivers of notices of meetings of the board; and other notices / The N-PCL continues to provide that the by-laws may prescribe what constitutes notice of a board meeting.[9]
The by-laws should include a provision setting forth the number of days required for notice of board meetings and the acceptable methods for transmitting such notice.
Waivers of notice of meetings of the board, as of July 1, 2014, may be written or electronic. If written, the waiver must be executed by the director (facsimile signatures are permissible); if electronic, the waiver must be sent by electronic mail and set forth, or be submitted with, information from which it can reasonably be determined that the transmission was authorized by the director.[10]
The by-laws may permit notices of board and committee meetings and waivers of notices (as well as other notices to or from directors, such as resignation letters) to be provided by fax or e-mail in addition to postal mail or hand delivery.
/ Expand permitted means of participation in meetings of the board and committees thereof / Unless otherwise restricted by the certificate of incorporation or by-laws, directors or committee members may participate in a meeting of the board or a committee thereof by means of electronic video screen communication, as well as a conference telephone or similar communications equipment, as long as all persons participating can hear each other at the same time, and each director can participate in all matters before the board or committee.[11]
The Revitalization Act embraces modern technologies. If the certificate of incorporation or by-laws restrict such participation in meetings of the board or its committees, a corporation may wish to consider amending the certificate of incorporation or by-laws, as applicable, to remove the restriction.
/ Expand permitted means of action by the board and committees thereof without a meeting to include electronic consents / Unless otherwise restricted by the certificate of incorporation or by-laws, actions of the board and any committee thereof may be taken without a meeting upon the consent of all members of the board or committee to the adoption of a resolution authorizing the action. Under the Revitalization Act, consents may be written or electronic. If written, the consent must be executed by the director (facsimile signatures are permissible). If electronic, the transmission of the consent must be sent by electronic mail and set forth, or be submitted with, information from which it can reasonably be determined that the transmission was authorized by the director.[12]
If the certificate of incorporation or by-laws restrict the means of acting without a meeting, a corporation may wish to consider amending the certificate of incorporation or by-laws, as applicable, to remove the restriction.[13]
/ Ensure that the by-laws permit the establishment of committees of the board / The board does not have the authority to establish board committees unless such authority is set forth in either the corporation’s certificate of incorporation or by-laws. If the certificate of incorporation or by-laws gives the board the right to establish committees, the board, by resolution adopted by a majority of the entire board, may designate from among its members an executive committee and other committees of the board.[14]
Because board committees can play a vital role in advancing the work of the board, the by-laws should permit the establishment of committees of the board. Moreover, the Revitalization Act provides that certain oversight functions, if not carried out by the independent members of the board, must be carried out by the audit committee or other board committee consisting solely of independent directors within the meaning of N-PCL Section 102(a)(21). It is therefore essential that the board have the authority to create such board committees.
/ Remove references to “standing” and “special” committees, and classify committees as committees of the board or committees of the corporation / The Revitalization Act eliminates the distinction between standing and special committees of the board and provides for two types of committees: “committees of the board” and “committees of the corporation.”
Committees of the board may bind the board. Committees of the board must consist only of directors and must have at least three directors.[15] Committees of the board must be formed, and the members of those committees elected or appointed, by action of a majority of the entire board.
Committees of the corporation may not bind the board and may include non-directors. Additionally, members of committees of the corporation may be elected or appointed pursuant to a procedure set forth in the by-laws, or if no procedure is provided, in the same manner as officers of the corporation are elected or appointed, and need not be elected or appointed by a majority of the entire board.[16]
Any reference in the by-laws to the former distinction in the N-PCL between standing and special committees of the board should be removed. In determining whether the corporation’s current committees should be considered committees of the board or committees of the corporation, the corporation should consider the authority delegated to each such committee (i.e., only committees of the board may bind the board), and the membership requirements indicated above (i.e., only directors may be voting members of committees of the board). The by-laws should include procedures for the appointment or election of members of committees of the corporation (if there is no such provision, N-PCL Section 712(e) provides that they may be elected or appointed in the same manner as officers) and state that committees of the corporation may not bind the board.
/ If the by-laws list specific committees and their functions, update to include the audit committee / Corporations required to file an independent certified public accountant’s audit report with the attorney general pursuant to Section 172-B of the Executive Law[17] will need to ensure that oversight of the audit of the corporation’s financial statements and certain other audit oversight functions are carried out either by the corporation’s board (excluding any directors who are not independent directors within the meaning of N-PCL Section 102(a)(21)) or an audit committee of the board comprised of independent directors.[18]
Such corporations may wish to expressly provide in the by-laws for the establishment of an audit committee. If the by-laws provide for the establishment of an audit committee, and include qualifications for service on the audit committee, the by-laws should require that the audit committee be comprised solely of independent directors within the meaning of N-PCL Section 102(a)(21). If the by-laws set forth the functions of the audit committee, those functions should include the audit oversight requirements set forth in N-PCL Section 712-a.[19]
/ If the conflict of interest policy is contained within the by-laws, update to ensure compliance with the N-PCL / Corporations are required to adopt a conflict of interest policy containing specific provisions (including provisions for disclosing, addressing and documenting related party transactions in accordance with N-PCL Section 715).[20]
If a corporation’s conflict of interest policy is included in its by-laws, such policy should be updated to include, at a minimum, the conflict of interest policy requirements set forth in N-PCL Section 715-a. As an alternative, the corporation may wish to remove the conflict of interest policy from its by-laws and adopt a separate conflict of interest policy that complies with N-PCL Section 715-a.[21]
/ Restrict employees from serving as board chair or any other office with similar responsibilities / No employee may serve as chair of the board or hold any other title with similar responsibilities.[22]
This requirement becomes effective January 1, 2016. To ensure compliance with this requirement, a corporation may wish to include a provision in the by-laws restricting employees from serving as chair of the board or holding any other office with similar responsibilities (i.e., vice chair or president and vice president of the board if there is no chair/vice chair).
/ Prohibit any director or officer from being present at or participating in any board or committee deliberation or vote regarding his or her compensation / A corporation may pay reasonable compensation to its directors and officers. However, no person who may benefit from compensation may be present at or otherwise participate in any board or committee deliberation or vote concerning such person’s compensation (except that he or she may present background information or answer questions upon request by the board or committee prior to the commencement of deliberations or voting related thereto).[23]
To ensure compliance with this requirement, a corporation may wish to include a provision in its by-laws prohibiting any director or officer from being present at or participating in any board or committee deliberation or vote concerning any compensation from which he or she may benefit.
/ Corporations with Members:
Expand permitted means of providing notices of meetings of the members; waivers of notice of meetings of the members; and other notices / Notices of meetings of the members may be delivered by facsimile telecommunication or electronic mail, as well as by postal mail or by personal delivery. However, notices must be sent by first class mail to members who so request. For corporations permitted to provide notice to members by publication (i.e., corporations having more than 500 members), such notice must also be prominently posted on the homepage of the corporation’s website continuously from the date of publication of the notice through the date of the meeting.[24]
If the by-laws allow for notice of members’ meetings by fax or e-mail, they should also specify that notice will be provided by first class mail upon a member’s request. Where the by-laws provide for notice by publication, they should also require that the published notice be posted on the corporation’s website.
Under the Revitalization Act, if notice of a meeting of the members is sent by facsimile telecommunication or mailed electronically, such notice is given when directed to the member’s fax number or electronic mail address as it appears on the record of members, or, to such fax number or other electronic mail address as filed with the secretary of the corporation. However, such notice shall not be deemed to have been given electronically (1) if the corporation is unable to deliver two consecutive notices to the member by facsimile telecommunication or electronic mail; or (2) the corporation otherwise becomes aware that notice cannot be delivered to the member by facsimile telecommunication or electronic mail.[25]
If the by-laws include details regarding when notices of meetings of the members are deemed given, those details should include details regarding when fax or e-mail notice is deemed given.
Waivers of notice of meetings of the members may be written or electronic. If written, the waiver must be executed by the member or the officer, director, employee or agent authorized to act on behalf of the member (facsimile signatures are permissible). If electronic, the transmission of the waiver must be sent by electronic mail and set forth, or be submitted with, information from which it can reasonably be determined that the transmission was authorized by the member.[26]
The by-laws may permit waivers of notices, and other communications to or from the members, such as resignation letters, to be provided by fax or e-mail in addition to postal mail or hand delivery.
/ Corporations with Members:
Conform permitted means of authorizing proxies / A member may authorize another person or persons to act for him or her as proxy either by (i) executing a writing authorizing such person(s) to act for him or her by proxy (facsimile signatures are permissible) or (ii) by providing such authorization by electronic mail to the person(s) who will be the holder of the proxy or to a proxy solicitation firm or like agent, provided that such authorization by electronic mail must set forth information from which it can be reasonably determined that such authorization was authorized by the member. Any copy, facsimile telecommunication or other reliable reproduction of the signed writing or electronic mail may be substituted in lieu of the original writing or transmission, provided that such copy, facsimile telecommunication or other reproduction is a complete reproduction of the entire original writing or transmission. Proxy authorizations are no longer permitted to be made by telegram or cablegram.[27]
The by-laws may permit proxy authorizations to be accomplished by a signed writing or by e-mail and may allow for the use of faxed or other copies of proxy authorizations provided that such copy is a complete copy of the proxy. References to proxy authorizations by telegram or cablegram should be removed from the by-laws.
/ Corporations with Members:
Expand permitted means of action by the members without a meeting / Actions of the members may be taken without a meeting upon the consent of all of the members entitled to vote (or, if the certificate of incorporation so authorizes, less than all of the members),[28] which consent must set forth the action taken. Any such consent may be written or electronic. If written, the consent must be executed (including by facsimile signature) by the member or the member’s authorized officer, director, employee or agent. If electronic, the transmission of the consent must be sent by electronic mail and set forth, or be submitted with, information from which it can reasonably be determined that the transmission was authorized by the member.[29]
The by-laws may permit actions without a meeting of the members pursuant to electronic, as well as written, consent of all of the members.
/ Corporations with Members:
Prohibit any member from being present at or participating in any board or committee deliberation or vote regarding his or her compensation / A corporation may pay reasonable compensation to its members. However, no person who may benefit from compensation may be present at or otherwise participate in any board or committee deliberation or vote concerning such person’s compensation (except that he or she may present background information or answer questions upon request by the board or committee prior to the commencement of deliberations or voting related thereto).[30]
To ensure compliance with this requirement, a corporation may wish to include a provision in its by-laws prohibiting any member from being present at or participating in any board or committee deliberation or vote concerning any compensation from which he or she may benefit.
/ General Compliance Check / The by-laws should be reviewed generally for compliance with the provisions of the N-PCL that were not amended by the Revitalization Act. For example, a quorum of the directors must be at least one third of the entire board in the case of a board with 15 or fewer directors, or at least five directors plus one additional director for every 10 in excess of 15 in the case of a board with more than 15 directors;[31] proxy voting is permitted for members (if any), but directors may not vote by proxy;[32] any provisions regarding classified or staggered boards must be set forth in the certificate of incorporation unless there are members that have approved any by-law provision regarding the classification of the directors;[33] a director elected or appointed to fill a vacancy holds office only until the next annual meeting at which the election of directors is in the regular order of business, not for the unexpired term of the director he or she is replacing,[34] etc.
[1]The New York State Attorney General’s Charities Bureau is expected to issue guidance on the Revitalization Act, which will be posted on the Charities Bureau website at