On September 26, 2016, Governor Cuomo signed a bill to allow the interment of cremated pet remains alongside human remains. Last week, the New York State Division of Cemeteries ("DoC") issued guidance to help cemeteries understand the law's requirements. Cemeteries that do not wish to handle cremated pet remains are encouraged to explicitly include this restriction in their regulations. In addition, the new law does not apply to religious cemeteries.
Cemeteries planning to handle cremated pet remains must be aware of what constitutes acceptable remains, how such remains may be handled, and the associated documentation requirements. The law limits "pet cremated remains" to ashes of a "domestic animal... adapted or tamed to live in intimate association with people" that was cremated "at a pet crematorium." However, it falls to the cemetery to verify that any remains it accepts meet these criteria. Other examples of required documentation include: (1) proof of the sale of the burial rights and prices charged; (2) the name and signature of the person authorizing the interment; (3) the pet's name and type; (4) the date and location of the interment; and (5) whether the container for the pet's cremated remains was placed in the casket or buried separately. With respect to price, it should also be noted that the full interment charge must be deposited in the cemetery's permanent maintenance fund, and that such prices are subject to DoC approval.
Cemeteries must also be conscious of how and where they bury cremated pet remains. The law only authorizes the interment of such remains in a "grave, crypt, or niche" that "contains or will contain human remains." When cremated pet remains are interred, they should be kept in their own urn and not commingled with human remains. For ground burials, the remains should be placed inside or near the casket. Finally, a cemetery cannot have a section devoted only to interring or memorializing pet remains. However, it may limit the burial of pets to specific areas within the cemetery. These limits should be set forth in the cemetery's regulations. Cemeteries should also consider regulations on: (1) whether the policy for burying pet remains applies only to new graves or retroactively; (2) the maximum number of human and pet remains allowed per lot; (3) who may authorize interment of pet remains where there are multiple lot owners; and (4) disinterment procedures specific to pet remains.
In addition to guidance from DoC, the New York State Association of Cemeteries has prepared model regulations for issues related to cremated pet remains. These sample regulations will be included in a subsequent post
In 1963, the Catholic Church lifted its doctrinal prohibition on cremation, despite a continued preference for traditional burial. Yet as cremation has grown in popularity, many local priests have struggled with the absence of clear norms for handling cremated remains. In response, the Vatican recently issued new guidelines on cremation which, among other things, prohibit the scattering of ashes in favor of preserving the cremated remains in cemeteries and other approved sacred sites. The new guidelines also reaffirm the spiritual and canonical underpinnings of the Church's teachings and stated preference for traditional burial.
The guidelines reiterate that burial in a cemetery "encourages family members and the whole Christian community to pray for and remember the dead." Accordingly, the Vatican states that cremation urns should not be kept in loved one's homes except in "grave and exceptional cases dependent on cultural conditions of a localized nature." The text also prohibits scattering loved one's ashes or using the ashes in the creation of jewelry, stating that such "unfitting or superstitious practices" can promote "erroneous ideas about death."
On Monday afternoon, Governor Andrew Cuomo signed S.2582/A.2647, which allows for humans to be buried with their cremated pet provided that the cemetery consents. Cemeteries will also be required to place all payments for the pet internment in its permanent maintenance fund and provide customers with a list of charges pertaining to the burial of the pet. This legislation doesnot apply to cemeteries owned or operated by religious associations or societies.
For a more detailed discussion, refer to our earlier blog post on thew new law, which can be found here.
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part VI, Miscellaneous Provisions, EPTL, and Conclusion
This is the sixth and final post in our series looking at the bill, passed by the New York State Assembly and Senate on June 16, 2016, to amend the Not-For-Profit Corporation Law (“NFPCL”) [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This post looks at the remaining provisions in the bill, which include both minor provisions and comparable clauses to those described in past posts to the Estates Powers and Trusts Law.
The provisions discussed in our previous posts are the most notable revisions to the NFPCL in the bill, and the bill devotes a full five sections to implementing the same changes in the equivalent provisions of the Estates, Powers, and Trusts Law, including the provisions defining key persons, governing related party transactions and the determination of whether a given transaction is “fair, reasonable, and in the trust’s best interest at the time,” and Board of Trustees role in administering and overseeing conflict of interest and whistleblower policy provisions.
There are also several sections whose changes solely reflect the shift from “key employee” to “key person.” For example, the provision allowing service of process upon a “director, officer or key employee,” has been amended to ready “director, officer or key person.” As ensuring this type of statutory uniformity is the extent of the changes to those provisions, they are not individually addressed.
Finally, the bill’s last provision provides that the bill shall have an effective date of 180 days after passage into law [updated: in light of the date of passage, the law will now be effective May 27, 2017]. The sole exception to this is section six, relating to an employee serving as chairman of the Board. This provision shares the effective date of the provision it is replacing, which is January 1, 2016.
We hope you found this series of posts informative. If you wish to read the full bill for yourself, the text of the bill is available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part V, Related Party Transactions
This is the fifth post in our series looking at the bill, passed by the New York State Assembly and Senate on June 16, 2016, to amend the Not-For-Profit Corporation Law (“NFPCL”) [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This post looks at the provisions governing related party transactions.
As discussed in our first post, related party transactions are transactions or agreements entered into between the corporation and a “related party,” essentially a person linked to the corporation such that a conflict may exist. Our first post also noted several exceptions to what is considered a related party transaction. However, the recently passed bill also includes provisions clarifying how corporations should approach transactions with related parties, as well as how corporations may defend themselves against allegations of impropriety.
The key standard regarding related party transactions is that “no corporation shall enter into any related party transaction unless the transaction is determined… to be fair, reasonable and in the corporation's best interest at the time of such determination.” This determination may be made by the Board of Directors (“Board”) or a committee authorized by the Board. Moreover, the importance of this determination cannot be overstated due to the legal presumption it creates.
Under two new paragraphs in § 715, the determination that a related party transaction was “fair, reasonable and in the corporation's best interest at the time” is a complete defense to any action brought by a party other than the attorney general for a violation of the rules on related party transactions. Accordingly, every decision that could potentially involve a related party should be examined under the “fair, reasonable and in the corporation's best interest” standard before the corporation decides to move forward.
In addition, for claims brought by the attorney general alleging illegal related party transactions, it is a defense that the transaction was “fair, reasonable and in the corporation's best interest at the time” and that, prior to receipt of attorney general’s request for information regarding the transaction, the Board:
(a) ratified the transaction in good faith as being “fair, reasonable and in the corporation's best interest at the time” by majority vote (and if involving a third party with a substantial financial interest, the Board considered other options to extent possible);
(b) documented in writing the nature of the violation and Board’s basis for ratifying the transaction; and
(c) put in place procedures to ensure the corporation’s future compliance with the statute.
Thus, even where the determination is not made at the time of a transaction, it is critical that the Board act to ratify such a decision as soon as possible.
*It should be noted that the attorney general provision, which was added at the attorney general’s request near the end of the bill’s consideration before passage, suffers from apparent drafting errors. Several legislators have indicated that this provision will be subject to revision in the 2017 session.*
Our final post will focus on the remaining provisions of the new bill. The full text of the bill is publicly available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part IV, Conflict of Interest and Whistleblower Policies
This is the fourth post in our series looking at the bill, passed by the New York State Assembly and Senate on June 16, 2016, to amend the Not-For-Profit Corporation Law (“NFPCL”) [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This post looks at the provisions related to the adoption, oversight, and compliance assurance for conflict of interest and whistleblower policies.
The current NFPCL provides that “[t]he board or designated audit committee of the board shall oversee the adoption, implementation of, and compliance with any conflict of interest policy or whistleblower policy adopted by the corporation if this function is not otherwise performed by another committee of the board comprised solely of independent directors.” The new bill repeals this provision to create separate sections for each type of policy (§ 715-a (a) for conflicts of interest and § 715-b (a) for whistleblowers). However in doing so, the new bill vests the responsibility to “adopt, and oversee the implementation of, and compliance with” each type of policy solely in the Board, whereas before the task could be delegated.
The bill also changes the substance of each type of policy. Whereas the existing law required procedures for disclosing a conflict of interest to the audit committee, or alternatively to the Board, the new bill allows such disclosures to be made to any committee. In addition, conflict of interest policies must now include procedures for disclosing both actual and potential conflicts. Finally, the conflict of interest policy must also include procedures for how the Board or committee will determine whether a conflict exists.
As to whistleblower policies, the new bill mandates that policies require their administrator to report to the Board of Directors or an authorized committee, and prohibit directors who are employees of the corporation from voting or participating in deliberations relating to the whistleblower policy. The policy must also prohibit the subject of the complaint from being present during the deliberations or voting, though that individual may still answer questions prior to deliberations starting.
*the provision is § 715-b (b)(3). The previous § 715-b (b)(3) is moved to § 715-b (b)(4).
Our next post will focus on related party transactions. The full text of the bill is publicly available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913
On June 30, 2016, the National Funeral Directors Association released the 2016 NFDA Cremation and Burial Report. This report projected that last year, cremation accounted for 48.5% of remains, while burial fell to 45.4%. The report also suggests that this shift will accelerate in coming years, with cremation accounting for 56% of remains by 2020 and over 70% by 2030. The report cites various factors underlying this shift, including cost, environmental concerns, a less religious population, and changing consumer preference.
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part III, Committees and Employee as Chairman
This is the third post in our series looking at the bill, passed by the New York State Assembly and Senate on June 16, 2016, to amend the Not-For-Profit Corporation Law (“NFPCL”) [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This post looks at the provisions related to the creation of committees by the corporation’s Board of Directors (“Board”) and powers those committees may hold.
The current NFPCL provides that the certificate of incorporation, by-laws, or Board by majority vote, may create an executive committee and other committees consisting of three or more directors that, to the extent provided in the documents creating them, act with the power of the Board. These committees are prohibited, however, from (1) submitting matters requiring member approval, (2) filling vacancies in the Board or committees, (3) fixing compensation for Board/committee members, (4) amending, repealing, or adopting new by-laws, and (5) amending or repealing any resolution of the board that does not allow for such changes.
While the recently passed bill does not change how committees are created or the Board’s power to appoint committee members, it does add significant new restrictions. For example, executive committee members must now be appointed by majority vote of the Board. Furthermore, boards with 30 or more members require a quorum and the vote of three-quarters of directors present to make an appointment to an executive or similar committee. The bill also provides that the by-laws may designate directors holding certain positions (ex: chairman, treasurer, etc.) as ex-officio, nonvoting members of specific committees.
Finally, the bill adds four additional items that no committee “of any kind” shall have authority over: (6) the election or removal of officers and/or directors, (7) the approval of a merger or plan of dissolution, (8) the authorization or adoption of a resolution recommending to the members the sale, lease, exchange or other disposition of all, or substantially all, assets (or if there are no members entitled to vote, the authorization of such transaction), and (9) the approval of amendments to the certificate of incorporation. As a result, committees are prohibited from bypassing the Board or otherwise appropriating its authority regarding matters that go to the heart of the corporation’s governance and continued existence.
One final provision of note relates to an employee of the corporation serving as chairman of the Board. The effective date of the provision banning this practice has been subject to a series of one-year extensions in each of the last few years, and the new bill creates a permanent fix. It allows the Board to approve an employee serving as its chairman by a two-thirds vote of the entire board, and by further providing contemporaneously written documents on the basis for the board’s approval. However, an employee serving as chairman is disqualified from being an “independent director.”
Our next post will focus on conflict of interest and whistleblower policies. The full text of the bill is publicly available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part II, Definitions, continued
This is the second post in our series looking at the bill, passed by the New York State Assembly and Senate on June 16, 2016, to amend the Not-For-Profit Corporation Law (“NFPCL”). [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This post continues to look at new definitions in the NFPCL, specifically “independent directors.”
“Independent directors” are members of the Board of Directors (“Board”) entitled to participate in making certain decisions due to their unbiased position. The old definition required a director, or any relative of a director, to not have been an employee of the corporation or an affiliate of the corporation for the last 3 years. The new bill expands this to include not having been a “key person” in the past three years. The bill also changes the “substantial financial interest” requirement by creating a sliding scale for when an interest in the corporation is “substantial.” In addition, the form a qualifying “interest” can take has been expanded from making payments to, or receiving payments from, the corporation to include the provision or receipt of property or services to or from the corporation
The bill also amends how the terms “compensation” and “payment” are defined in the context of independent directors. Regarding compensation, the term now excludes the payment of any reimbursements to directors for expenses that they have reasonably incurred in their capacity as directors. The term also excludes paying directors reasonable compensation for their service on the Board or on a committee thereof.
Finally, the term “payment” is interpreted to exclude payments made by the corporation at fixed, non-negotiable rates for services received, where such services by and to the corporation are available to the public on the same terms, and where the receipt of these services is not available to the corporation from another source.
Our next post will focus on committees created by the Board of Directors. The full text of the bill is publicly available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913
Legislature Sends Bill Amending Not-For-Profit Corporation Law To Governor: Part 1, Introduction and Definitions
On June 16, 2016, the New York State Assembly and Senate passed a bill to amend the Not-For-Profit Corporation Law (“NFPCL”) [updated: the bill was signed into law by Governor Cuomo on November 29, 2016, and has an effective date of May 27, 2017]. This bill removes inconsistences resulting from the Nonprofit Revitalization Act of 2013, while making focused changes to the law itself. These changes include: (1) amending definitions, (2) clarifying the powers of committees created by the Board of Directors (“Board”), (3) shifting responsibility for overseeing conflict of interest and whistleblower policies to the Board, and the content of the policies themselves, (4) clarifying how not-for-profits handle related party transactions, and (5) miscellaneous changes to several minor provisions. These subjects will each be the topic of a post in this series, beginning with definitional changes in the first two posts.
One of the most important changes in the bill is replacing the term “key employee” with “key person.” A key person is defined as any person, not a director or officer, whether employed by the corporation or not, 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.
This encompasses any non-employee who plays a significant role in the corporation’s activities, such as informal advisors, family members of directors, employees who have retired, etc. The impact of this definition is significant, as the “key person” term is used repeatedly throughout the NFPCL in a variety of contexts. It is also referenced in several other important definitions, most notably “independent director,” “related party,” and “related party transaction,” each of which impact how corporations handle conflicts of interest.
The main source of potential conflicts of interest are related party transactions. A “related party” is defined as (i) a director, officer, or key person of the corporation or an affiliate thereof, (ii) a relative of such a person, or (iii) an entity in which any of the above people has a 35% of greater ownership or interest. Due to this relationship, when a related party engages in a transaction or agreement with the corporation, there is an inherent risk of a conflict of interest. These “related party transactions” will be discussed in more detail in our fifth post, however the definition itself lists three new exceptions: (i) transactions that are de minimis, or the related party’s financial interest is de minimis (ii) transactions that would not customarily be reviewed in the ordinary course of business and are available to others on similar terms, or (iii) transactions that benefit a related party solely as class member meant to be the beneficiary of the corporation’s charitable mission, and that the benefit is available to other similarly situated class members on same terms. Under these circumstances, the transaction is not a “related party transaction.”
Our next post will focus on the definition for independent directors. The full text of the bill is publicly available here: http://legislation.nysenate.gov/pdf/bills/2015/S7913