The trend in nonprofit law is to provide for more oversight – both financial and managerial – so as to bring nonprofits in line with the best practices of the private sector. The State of New York recently took a step forward in that direction by passing the Nonprofit Revitalization Act of 2013 (“Act”).
The Act provides for a number of changes to tighten the way nonprofits are run. First, it creates a mechanism for nonprofit boards of trustees to police their potential conflicts of interest. A formal structure must be set up to identify and consider whether these conflicts are such that they must be prohibited.
There is a new mechanism to allow for a lawsuit to “unwind” interested party transactions. Likewise, an employee of the nonprofit will no longer be allowed to serve as its Board Chairman. There are also provisions to allow meetings to take place by email or video link.
Overall, any nonprofit operating in New York should review the provisions of the Act to ensure compliance with it.