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