N.Y. Mental Hygiene Law § 31.22: Approval of certain certificates of incorporation or articles of organization; granting of operating certificates

§ 31.22 Approval of certain certificates of incorporation or articles of

organization; granting of operating certificates.

(a) No certificate of incorporation of a business or not-for-profit

corporation, or articles of organization of a limited liability company,

shall hereafter be filed which includes among its corporate purposes or

powers the establishment or operation of a facility for which an

operating certificate is required by this article from the commissioner

of the office of mental health or the solicitation of contributions for

any such purpose, except with the written approval of the commissioner

and, when otherwise required by law, the approval of a justice of the

supreme court endorsed on or annexed to the certificate of

incorporation.

(b) An application for approval of the proposed certificate of

incorporation or articles of organization shall be filed with the

commissioner together with such other forms and information as shall be

prescribed by, or acceptable to, the commissioner.

The commissioner shall not approve a certificate of incorporation or

articles of organization or grant an operating certificate unless he is

satisfied, insofar as applicable, as to (1) the public need for the

services or the facility which the proposed corporation or proposed

provider of services is empowered to perform or maintain at the time and

place and under the circumstances proposed; (2) the character,

competence and standing in the community of the proposed incorporators,

directors, sponsors, stockholders, members, managers, partners, or

operators, provided that in making such determination the commissioner

is authorized to consider whether or not, within ten years of the date

of the application, any such persons have been denied renewal for cause

of an operating certificate, or have had an operating certificate

revoked or suspended for cause, and such denial, revocation or

suspension was not reversed after an administrative hearing or other

appeal, for a program or facility licensed or operated by a health,

mental hygiene, social services or education agency or department of

this or any state or have failed to operate a program serving the

mentally disabled, other disabled persons as defined in subdivision

twenty-one of section two hundred ninety-two of the executive law, the

aged, children or other persons receiving health, mental hygiene,

residential, social or educational services in continuous compliance

with applicable laws or regulations within the previous ten years in any

state; (3) the financial resources of the proposed corporation or

proposed provider of services and its sources of future revenues; (4)

the availability of facilities or services which may serve as alternates

or substitutes for the facility or services which the proposed

corporation or proposed provider of services is empowered to maintain or

render; (5) such other matters as he shall deem pertinent in the public

interest. The commissioner in approving the proposed certificate of

incorporation or articles of organization or issuing the proposed

operating certificate may request and consider information and advice

from all available sources including local and regional mental health

and health planning agencies and groups as to the matters set forth

herein. If the commissioner proposes to disapprove the application he

shall afford the applicant an opportunity to request a public hearing.

The commissioner shall not take any action contrary to the advice of the

health systems agency for facilities other than community residences or

residential care centers for adults until he affords an opportunity to

the agency to request a public hearing and, if so requested, a public

hearing shall be held. The commissioner, on his own motion, may hold a

public hearing on the application. Any public hearings held pursuant to

this subdivision may be conducted by the commissioner or by an

individual designated by the commissioner.

(c) (1) Any change in the person or entity which is the holder of an

operating certificate of a facility for which an operating certificate

has been issued pursuant to this article shall be approved by the

commissioner in accordance with the provisions of this subdivision and

subdivisions (a) and (b) of this section, except that: (i) any such

change shall be subject to approval by the commissioner in accordance

with paragraph two of subdivision (b) of this section only with respect

to the new person or entity, and any remaining persons or entities who

have not been previously approved for that facility in accordance with

such paragraph; and (ii) any such change shall not be subject to

paragraph one of subdivision (b) of this section.

(2) Any transfer, assignment or other disposition of ten percent or

more of the stock, membership interest or voting rights thereunder of a

corporation or a limited liability company which is the holder of an

operating certificate for a facility providing mental hygiene services

or any transfer, assignment or other disposition of the stock or voting

rights thereunder of such a corporation which results in the ownership

or control of more than ten percent of the stock, ownership or voting

rights thereunder of such corporation or limited liability company by

any person shall be subject to approval by the commissioner in

accordance with the provisions of this subdivision and subdivisions (a)

and (b) of this section and rules and regulations promulgated pursuant

thereto. In the absence of such approval, the operating certificate of

such facility shall be subject to revocation or suspension, except that:

(i) any such transaction shall be subject to approval by the

commissioner in accordance with paragraph two of subdivision (b) of this

section only with respect to a new stockholder, member or a new

principal stockholder; and (ii) any such transaction shall not be

subject to paragraph one of subdivision (b) of this section.

(3) No operating certificate shall be issued for a facility which

would be operated by any partnership or limited liability company, any

of the members of which are not natural persons.

(4) No operating certificate shall be issued for a facility which

would be operated by a corporation any of the stock of which is owned by

another corporation or a limited liability company any of the stock of

which is owned by another corporation.

(d) Where the approval required by subdivision (a) of this section has

not been obtained, the commissioner may institute and maintain an action

in the supreme court through the attorney general to procure a judgment

dissolving and vacating or annulling (1) the certificate of

incorporation of any such corporation or articles of organization of any

such limited liability company, or (2) the certificate of incorporation

of any corporation or articles of organization of any such limited

liability company hereafter incorporated or formed, the name, purposes,

objectives, or activities of which in any manner may reasonably lead to

the belief that the corporation or limited liability company possesses

or may exercise any of such purposes.