N.Y. Not-for-Profit Corporation Law § 719: Liability of directors in certain cases

§ 719. Liability of directors in certain cases.

(a) Directors of a corporation who vote for or concur in any of the

following corporate actions shall be jointly and severally liable to the

corporation for the benefit of its creditors or members or the ultimate

beneficiaries of its activities, to the extent of any injury suffered by

such persons, respectively, as a result of such action, or, if there be

no creditors or members or ultimate beneficiaries so injured, to the

corporation, to the extent of any injury suffered by the corporation as

a result of such action:

(1) The distribution of the corporation's cash or property to members,

directors or officers, other than a distribution permitted under section

515 (Dividends prohibited; certain distributions of cash or property

authorized).

(2) The redemption of capital certificates, subvention certificates or

bonds, to the extent such redemption is contrary to the provisions of

section 502 (Member's capital contributions), section 504 (Subventions),

or section 506 (Bonds and security interests).

(3) The payment of a fixed or contingent periodic sum to the holders

of subvention certificates or of interest to the holders or

beneficiaries of bonds to the extent such payment is contrary to the

provisions of section 504 or section 506.

(4) The distribution of assets in violation of section 1002-a

(Carrying out the plan of dissolution and distribution of assets) or

without paying or adequately providing for all known liabilities of the

corporation, excluding any claims not filed by creditors within the time

limit set in a notice given to creditors under articles 10 (Non-judicial

dissolution) or 11 (Judicial dissolution).

(5) The making of any loan contrary to section 716 (Loans to directors

and officers).

(b) A director who is present at a meeting of the board, or any

committee thereof, at which action specified in paragraph (a) is taken

shall be presumed to have concurred in the action unless his dissent

thereto shall be entered in the minutes of the meeting, or unless he

shall submit his written dissent to the person acting as the secretary

of the meeting before the adjournment thereof, or shall deliver or send

by registered mail such dissent to the secretary of the corporation

promptly after the adjournment of the meeting. Such right to dissent

shall not apply to a director who voted in favor of such action. A

director who is absent from a meeting of the board, or any committee

thereof, at which such action is taken shall be presumed to have

concurred in the action unless he shall deliver or send by registered

mail his dissent thereto to the secretary of the corporation or shall

cause such dissent to be filed with the minutes of the proceedings of

the board or committee within a reasonable time after learning of such

action.

(c) Any director against whom a claim is successfully asserted under

this section shall be entitled to contribution from the other directors

who voted for or concurred in the action upon which the claim is

asserted.

(d) Directors against whom a claim is successfully asserted under this

section shall be entitled, to the extent of the amounts paid by them to

the corporation as a result of such claims:

(1) Upon reimbursement to the corporation of any amount of an improper

distribution of the corporation's cash or property, to be subrogated to

the rights of the corporation against members, directors or officers who

received such distribution with knowledge of facts indicating that it

was not authorized by this chapter, in proportion to the amounts

received by them respectively.

(2) Upon reimbursement to the corporation of an amount representing an

improper redemption of a capital certificate, subvention or bond, to

have the corporation rescind such improper redemption and recover the

amount paid, for their benefit but at their expense, from any member or

holder who received such payment with knowledge of facts indicating that

such redemption by the corporation was not authorized by this chapter.

(3) Upon reimbursement to the corporation of an amount representing

all or part of an improper payment of a fixed or contingent periodic sum

to the holder of a subvention certificate, or of interest to the holder

or beneficiary of a bond, to have the corporation recover the amount so

paid, for their benefit but at their expense, from any holder or

beneficiary who received such payment with knowledge of facts indicating

that such payment by the corporation was not authorized by this chapter.

(4) Upon payment to the corporation of the claim of the attorney

general or of any creditor by reason of a violation of subparagraph (a)

(4), to be subrogated to the rights of the corporation against any

person who received an improper distribution of assets.

(5) Upon reimbursement to the corporation of the amount of any loan

made contrary to section 716 (Loans to directors and officers), to be

subrogated to the rights of the corporation against a director or

officer who received the improper loan.

(e) A director or officer shall not be liable under this section if,

in the circumstances, he discharged his duty to the corporation under

section 717 (Duty of directors and officers).

(f) This section shall not affect any liability otherwise imposed by

law upon any director or officer.