§ 715 — Related party transactions

New York § 715

• Jurisdiction: New York
• Law NPC: Not-for-Profit Corporation
• Art. 7: Directors and Officers

Text

§ 715. Related party transactions.\n (a) No corporation shall enter into any related party transaction\nunless the transaction is determined by the board, or an authorized\ncommittee thereof, to be fair, reasonable and in the corporation's best\ninterest at the time of such determination. Any director, officer or key\nperson who has an interest in a related party transaction shall disclose\nin good faith to the board, or an authorized committee thereof, the\nmaterial facts concerning such interest.\n (b) With respect to any related party transaction involving a\ncharitable corporation and in which a related party has a substantial\nfinancial interest, the board of such corporation, or an authorized\ncommittee thereof, shall:\n (1) Prior to entering into the transaction, consider alternative\ntransactions to the extent available;\n (2) Approve the transaction by not less than a majority vote of the\ndirectors or committee members present at the meeting; and\n (3) Contemporaneously document in writing the basis for the board or\nauthorized committee's approval, including its consideration of any\nalternative transactions.\n (c) The certificate of incorporation, by-laws or any policy adopted by\nthe board may contain additional restrictions on related party\ntransactions and additional procedures necessary for the review and\napproval of such transactions, or provide that any transaction in\nviolation of such restrictions shall be void or voidable.\n (d) Unless otherwise provided in the certificate of incorporation or\nthe by-laws, the board shall have authority to fix the compensation of\ndirectors for services in any capacity.\n (e) The fixing of compensation of officers, if not done in or pursuant\nto the by-laws, shall require the affirmative vote of a majority of the\nentire board unless a higher proportion is set by the certificate of\nincorporation or by-laws.\n (f) The attorney general may bring an action to enjoin, void or\nrescind any related party transaction or proposed related party\ntransaction that violates any provision of this chapter or was otherwise\nnot reasonable or in the best interests of the corporation at the time\nthe transaction was approved, or to seek restitution, and the removal of\ndirectors or officers, or seek to require any person or entity to:\n (1) Account for any profits made from such transaction, and pay them\nto the corporation;\n (2) Pay the corporation the value of the use of any of its property or\nother assets used in such transaction;\n (3) Return or replace any property or other assets lost to the\ncorporation as a result of such transaction, together with any income or\nappreciation lost to the corporation by reason of such transaction, or\naccount for any proceeds of sale of such property, and pay the proceeds\nto the corporation together with interest at the legal rate; and\n (4) Pay, in the case of willful and intentional conduct, an amount up\nto double the amount of any benefit improperly obtained.\n (g) The powers of the attorney general provided in this section are in\naddition to all other powers the attorney general may have under this\nchapter or any other law.\n (h) No related party may participate in deliberations or voting\nrelating to a related party transaction in which he or she has an\ninterest; provided that nothing in this section shall prohibit the board\nor authorized committee from requesting that a related party present\ninformation as background or answer questions concerning a related party\ntransaction at a board or committee meeting prior to the commencement of\ndeliberations or voting relating thereto.\n (i) In an action by any person or entity other than the attorney\ngeneral, it shall be a defense to a claim of violation of any provisions\nof this section that a transaction was fair, reasonable and in the\ncorporation's best interest at the time the corporation approved the\ntransaction.\n (j) In an action by the attorney general with respect to a related\nparty transaction not approved in accordance with paragraphs (a) or (b)\nof this section at the time it was entered into, whichever is\napplicable, it shall be a defense to a claim of violation of any\nprovisions of this section that (1) the transaction was fair, reasonable\nand in the corporation's best interest at the time the corporation\napproved the transaction and (2) prior to receipt of any request for\ninformation by the attorney general regarding the transaction, the board\nhas: (A) ratified the transaction by finding in good faith that it was\nfair, reasonable and in the corporation's best interest at the time the\ncorporation approved the transaction; and, with respect to any related\nparty transaction involving a charitable corporation and in which a\nrelated party has a substantial financial interest, considered\nalternative transactions to the extent available, approving the\ntransaction by not less than a majority vote of the directors or\ncommittee members present at the meeting; (B) documented in writing the\nnature of the violation and the basis for the board's or committee's\nratification of the transaction; and (C) put into place procedures to\nensure that the corporation complies with paragraphs (a) and (b) of this\nsection as to related party transactions in the future.\n