N.Y. Not-for-Profit Corporation Law § 715: Related party transactions

§ 715. Related party transactions.

(a) No corporation shall enter into any related party transaction

unless the transaction is determined by the board, or an authorized

committee thereof, to be fair, reasonable and in the corporation's best

interest at the time of such determination. Any director, officer or key

person who has an interest in a related party transaction shall disclose

in good faith to the board, or an authorized committee thereof, the

material facts concerning such interest.

(b) With respect to any related party transaction involving a

charitable corporation and in which a related party has a substantial

financial interest, the board of such corporation, or an authorized

committee thereof, shall:

(1) Prior to entering into the transaction, consider alternative

transactions to the extent available;

(2) Approve the transaction by not less than a majority vote of the

directors or committee members present at the meeting; and

(3) Contemporaneously document in writing the basis for the board or

authorized committee's approval, including its consideration of any

alternative transactions.

(c) The certificate of incorporation, by-laws or any policy adopted by

the board may contain additional restrictions on related party

transactions and additional procedures necessary for the review and

approval of such transactions, or provide that any transaction in

violation of such restrictions shall be void or voidable.

(d) Unless otherwise provided in the certificate of incorporation or

the by-laws, the board shall have authority to fix the compensation of

directors for services in any capacity.

(e) The fixing of compensation of officers, if not done in or pursuant

to the by-laws, shall require the affirmative vote of a majority of the

entire board unless a higher proportion is set by the certificate of

incorporation or by-laws.

(f) The attorney general may bring an action to enjoin, void or

rescind any related party transaction or proposed related party

transaction that violates any provision of this chapter or was otherwise

not reasonable or in the best interests of the corporation at the time

the transaction was approved, or to seek restitution, and the removal of

directors or officers, or seek to require any person or entity to:

(1) Account for any profits made from such transaction, and pay them

to the corporation;

(2) Pay the corporation the value of the use of any of its property or

other assets used in such transaction;

(3) Return or replace any property or other assets lost to the

corporation as a result of such transaction, together with any income or

appreciation lost to the corporation by reason of such transaction, or

account for any proceeds of sale of such property, and pay the proceeds

to the corporation together with interest at the legal rate; and

(4) Pay, in the case of willful and intentional conduct, an amount up

to double the amount of any benefit improperly obtained.

(g) The powers of the attorney general provided in this section are in

addition to all other powers the attorney general may have under this

chapter or any other law.

(h) No related party may participate in deliberations or voting

relating to a related party transaction in which he or she has an

interest; provided that nothing in this section shall prohibit the board

or authorized committee from requesting that a related party present

information as background or answer questions concerning a related party

transaction at a board or committee meeting prior to the commencement of

deliberations or voting relating thereto.

(i) In an action by any person or entity other than the attorney

general, it shall be a defense to a claim of violation of any provisions

of this section that a transaction was fair, reasonable and in the

corporation's best interest at the time the corporation approved the

transaction.

(j) In an action by the attorney general with respect to a related

party transaction not approved in accordance with paragraphs (a) or (b)

of this section at the time it was entered into, whichever is

applicable, it shall be a defense to a claim of violation of any

provisions of this section that (1) the transaction was fair, reasonable

and in the corporation's best interest at the time the corporation

approved the transaction and (2) prior to receipt of any request for

information by the attorney general regarding the transaction, the board

has: (A) ratified the transaction by finding in good faith that it was

fair, reasonable and in the corporation's best interest at the time the

corporation approved the transaction; and, with respect to any related

party transaction involving a charitable corporation and in which a

related party has a substantial financial interest, considered

alternative transactions to the extent available, approving the

transaction by not less than a majority vote of the directors or

committee members present at the meeting; (B) documented in writing the

nature of the violation and the basis for the board's or committee's

ratification of the transaction; and (C) put into place procedures to

ensure that the corporation complies with paragraphs (a) and (b) of this

section as to related party transactions in the future.