N.Y. Private Housing Finance Law § 13: Limited-profit housing companies; how created

§ 13. Limited-profit housing companies; how created. A company may be

created by three or more persons, approved by the commissioner, by

making, subscribing, acknowledging and filing with the secretary of

state a certificate which shall be entitled and endorsed "Certificate of

Incorporation of (name of company) pursuant to the Limited-Profit

Housing Companies Law"; provided that if the company is to be organized

to undertake a municipally-aided project the commissioner shall not

approve such persons unless they shall have been first approved by the

supervising agency; provided further that no company shall be created to

provide aged care accommodations or accommodations for handicapped

persons under this article, except under this article and the

not-for-profit corporation law. The certificate shall state:

1. The name of the proposed company.

2. The purposes for which it is to be formed which shall include among

other things a provision that the company is to plan, acquire,

construct, own, maintain, and operate projects pursuant to the terms and

provisions of this article.

3. Except in the case of a not-for-profit corporation, the amount of

the capital shares, and if any be preferred shares, the preference

thereof.

4. Except in the case of a not-for-profit corporation, the number of

shares of which capital shall consist, all of which shall have a par

value.

5. The municipality, as well as the county within this state, in which

its principal business office is to be located, and the address to which

the secretary of state shall mail a copy of process in any action or

proceeding against the corporation which may be served upon him.

6. Its duration, which shall be: (a) not less than the period for

which the loans contracted for under this article and the interest

thereon remain unpaid in whole or in part; and (b) not less than the

period for which tax exemption is granted pursuant to section

thirty-three of this article; and (c) in any event not less than

thirty-five years from the date of occupancy of any project, except as

may be provided in sections thirty-five and thirty-six of this article.

7. The number of directors, which shall not be less than three nor

more than twenty-one, and who shall be elected by the stockholders or

members of the corporation. Unless required by the certificate of

incorporation or the by-laws, directors need not be stockholders.

Directors appointed by the commissioner pursuant to subdivision fifteen

of this section or by the supervising agency pursuant to paragraph (c)

of subdivision sixteen of this section need not be stockholders or meet

other qualifications which may be prescribed by the certificate of

incorporation or the by-laws. In a corporation undertaking a state-aided

project one additional director may be designated by the commissioner,

and, in the case of all state-aided mutual companies, such additional

director shall be designated by the commissioner at the creation of the

company and shall serve from the time of such designation at least until

a board of directors has been elected by the tenants entitled to

occupancy in the project by reason of ownership of shares in such

company. In a corporation undertaking a municipally-aided project one

additional director may be designated by the supervising agency, and, in

the case of all municipally-aided mutual companies, such additional

director shall be designated by the supervising agency at the creation

of the company and shall serve from the time of such designation at

least until a board of directors has been elected by the tenants

entitled to occupancy in the project by reason of ownership of shares in

such company. The director appointed by the commissioner or the

supervising agency need not be a stockholder or meet other

qualifications which may be prescribed by the certificate of

incorporation or the by-laws. In the absence of fraud or bad faith the

director appointed by the commissioner hereunder or the supervising

agency or the directors appointed by the commissioner or by the

supervising agency pursuant to subdivision fifteen or paragraph (c) of

subdivision sixteen respectively of this section shall not be personally

liable for the debts, obligations or liabilities of the corporation.

Directors of a mutual housing company are to serve in that capacity

without salary but may be reimbursed for expenses incurred directly

relating to the duties of the director's office.

8. The names and post-office addresses of the directors until the

first annual meeting.

9. The names and post-office addresses of the subscribers to the

certificate, and a statement of the number of shares of stock which each

agrees to take in the company.

10. That, except in the case of a company to be aided by a loan from

the federal government or any agency or instrumentality thereof, or if

the mortgage or mortgage bonds which are to be used in financing the

company's project are to be insured by the federal government or any

agency or instrumentality thereof, the entire amount to be paid in cash

or property by the shareholders and income debenture holders shall be at

least five per centum of the project cost in the case of an urban rental

company and a mutual company. The provisions of this subdivision shall

not apply to a non-profit company incorporated pursuant to the

provisions of the not-for-profit corporation law and this article for

the purpose of providing housing for staff members, employees or

students of a college, university, hospital or child care institution

and their immediate families, or for aged or handicapped persons of low

income, nor to a municipally-aided non-profit company nor to a

municipally-aided mutual company, nor to a low income non-profit housing

company.

11. That, so long as this article shall remain applicable to any

project of the company, its real property shall not be sold,

transferred, encumbered or assigned except as permitted by the terms and

provisions of this article.

12. That all of the subscribers to the certificate are of full age,

that at least two-thirds of them are citizens of the United States, and

that at least one of the persons named as director is a citizen of the

United States and a resident of the state of New York.

13. That the company has been organized to serve a public purpose and

that it shall be and remain subject to the supervision and control of

the commissioner, or, if the company is organized to undertake a

municipally aided project, of the supervising agency, except as

otherwise provided in this article, so long as this article remains

applicable to any project of the company; that all real and personal

property acquired by it, and all structures erected or rehabilitated by

it, shall be deemed to be acquired, rehabilitated or created for the

proper effectuation of the purposes of this article, and that the

directors and subscribers of such company shall be deemed to have agreed

that they shall at no time receive or accept from such company in

repayment of their investment in its stock any sums in excess of the par

value of the stock, together with such dividends or other compensation

as are prescribed by or permitted under this article, and that, upon

dissolution of the company, any surplus remaining after the payment of

all its obligations shall be distributed and disposed of and title to

the property may be conveyed in fee, only as prescribed by this article.

14. The certificate may provide that in the event that income

debentures are issued by the company the owners thereof may be given the

same right to vote as they would have if possessed of certificates of

stock of the amount and par value of the income debentures held by them.

If provision is made for the issuance of income debentures interest

shall be paid by the company on income debentures only out of net

earnings of the company that would be applicable to payment of dividends

if there were no income debentures.

15. That in the event of a violation by a state-aided company of any

provision of the certificate of incorporation or of law or of the loan

or mortgage contract or any order of the commissioner or of any rules

and regulations duly promulgated pursuant to the provisions of this

article the commissioner may remove any or all of the existing directors

of the company and appoint such person or persons whom the commissioner

deems advisable, including officers and employees of the division of

housing and community renewal, as new directors to serve in the places

of those removed; that directors so appointed by the commissioner who

are officers or employees of the division of housing and community

renewal shall serve in such capacity without compensation; and that any

directors so appointed by the commissioner shall serve only for a period

coexistent with the duration of such violation or until the commissioner

is assured in a manner satisfactory to him against violations of a

similar nature.

16. If the company is organized to undertake a municipally-aided

project, such certificate shall contain:

(a) A declaration that the original directors, officers, subscribers

and income debenture holders possessing the right to vote, shall be

deemed at the time of accepting such offices, or subscribing to the

stock or income debentures to have agreed not to resign from the company

and not to sell their stock or income debentures prior to the completion

of the project and the certification of the total actual project cost by

the supervising agency, except with the consent of the supervising

agency.

(b) A declaration that the shares of stock and the income debentures

of the company shall be issued only in such amounts and form as may be

approved by the supervising agency and that no stock shall be redeemed,

purchased or retired and no income debentures shall be redeemed prior to

their dates of maturity or purchased or retired by the company during

the period in which the loan by the municipality is in force or for

which tax exemption is granted pursuant to section thirty-three of this

article, except with the consent of the supervising agency.

(c) A provision that in the event of a violation by the company of any

provision of the certificate of incorporation or of law or of the loan

or mortgage contract or of any rules and regulations duly promulgated

pursuant to the provisions of this article, the supervising agency may

remove any or all of the existing directors of the company and appoint

such person or persons which the supervising agency in its sole

discretion deems advisable, including officers or employees of the

supervising agency, as new directors to serve in the places of those

removed; that directors so appointed by the supervising agency who are

officers or employees of the supervising agency shall serve in such

capacity without compensation; and that any directors so appointed by

the supervising agency shall serve only for a period coexistent with the

duration of such violation or until the supervising agency is assured in

a manner satisfactory to it against violations of a similar nature.

(d) A provision that the supervising agency or its duly authorized

representative shall be notified in writing of and shall have the right

to attend all meetings of the board of directors or of the stockholders

and income debenture holders of the company.

(e) A provision that the sale of stock by a stockholder or the company

or the sale of income debentures, the holders of which possess the right

to vote, by any such holder or the company, shall be subject to the

consent of the supervising agency.

(f) Such other provisions, not inconsistent with law, as the

supervising agency may deem necessary to protect the investment of the

municipality and to carry out the purposes of this article.

17. The certificate of incorporation of a non-profit company

incorporated pursuant to the provisions of the not for-profit

corporation law and this article shall, in addition to all other matters

required by law to be stated therein, state:

a. That its purpose is to provide housing and auxiliary facilities for

staff members, employees or students of any college, university,

hospital, child care institution and their immediate families, for aged

or handicapped persons of low income, or for any one of the above

purposes, or to provide housing accommodations pursuant to the terms and

provisions of this article in the case of a municipally-aided non-profit

company, or to provide housing accommodations pursuant to the provisions

of this article in the case of a low income non-profit housing company;

b. That the directors or trustees are and at all times shall be

officers, directors or trustees of such college, university, hospital or

child care institution, or, in the case of a non-profit company

providing housing for aged or handicapped persons of low income or of a

municipally-aided non-profit company providing housing accommodations

pursuant to the terms and provisions of this article, or of a low income

non-profit housing company providing housing accommodations pursuant to

the provisions of this article, of a corporation organized pursuant to

the provisions of the not-for-profit corporation law;

c. That the property of such company shall upon dissolution vest in

such college, university, hospital, child care institution, or

not-for-profit corporation, and

d. That no part of the net earnings of such college, university,

hospital, child care institution or not-for-profit corporation shall

inure to the benefit of any private individual.

18. That the secretary of state is designated as the agent of the

company upon whom process in any action or proceeding against it may be

served.