Legislative Affairs Committee (Business Law)

The Legislative Affairs Committee follows bills in the New York State legislature that are of particular interest to business lawyers. Its activities include meetings with legislators and other interested groups, and the submission of memoranda opposing or supporting bills. The Committee is most active during the legislative session from April to June each year.

Legislative Affairs News Items

NYSBA Press Release: Nonprofit Law Signed

State Bar Association Praises Governor Cuomo for Signing Nonprofit Revitalization Act
December 19, 2013
New York State Bar Association President David M. Schraver today said the association is pleased that Governor Andrew Cuomo signed the Nonprofit Revitalization Act of 2013, which modernizes the way New York regulates nonprofit organizations, such as hospitals, museums, colleges and universities, religious and other charitable institutions.

“The State Bar Association has long advocated for meaningful reform of New York’s Not-for-Profit Corporation Law,” said Schraver of Rochester (Nixon Peabody). In June, a reform bill— which the State Bar Association helped draft—was passed by the Assembly with a 131-0 vote and by the Senate with a 62-1 vote.

The State Bar Association was actively involved in developing the legislation, working closely with interested groups, legislators, their staffs and Attorney General Eric T. Schneiderman. Members of the Bar Association’s Business Law Section testified at legislative hearings held in Rochester, New York City and Albany during May.

Schraver praised the efforts of the bill’s legislative sponsors, Sen. Michael H. Ranzenhofer (R-Williamsville) and Assemblyman James F. Brennan (D-Brooklyn).

“We congratulate Senator Ranzenhofer and Assemblyman Brennan for successfully guiding the bill through the Legislature,” he said. “We also commend Attorney General Schneiderman for his leadership. We are pleased that Governor Cuomo signed the reforms into law.”

“The Nonprofit Revitalization Act updates New York law, eliminates redundancies and improves state regulatory practices,” Schraver said. “By removing costly and unnecessary burdens, it lowers operating costs for charities and reduces incentives for them to incorporate in other states. These measures help nonprofits thrive in New York by reducing government red tape without compromising government oversight.”

The bill signed by the governor revises the state’s cumbersome Not-For-Profit Corporation Law. One key provision of the bill streamlines the designation and distinction among statutory types of non-profit corporations, replacing four types with two categories: charitable and non-charitable. The law takes effect July 1, 2014.

Private nonprofit organizations affect the lives of millions of New Yorkers every day and play a very significant role in the New York economy, he noted.

New York has more private nonprofit jobs than any state in the country, employing nearly 1.3 million individuals, mostly in the health care, education, social assistance and religious, civic and professional areas. In 2010, New York’s nonprofits paid $57 billion in wages and accounted for more than 18 percent of the state’s private sector jobs. The nonprofit sector job count grew 17 percent between 2000 and 2010.

The New York State Bar Association, with 76,000 members, is the largest voluntary state bar association in the country. It was founded in 1876.

Committee Activity in Review

As published in the NY Business Law Journal

WINTER 2017 NY BUSINESS LAW JOURNALBANKRUPTCY LAW COMMITTEE

The Legislative Affairs Committee monitored a variety of bills in the 2017 legislative session and circulated information for comment within the Section. After a very active 2016 session, this year’s legislative session was relatively quiet. The Committee participated in Section discussions on topics of interest for possible further development, including limited liability companies and the Uniform Voidable Transactions Act. The Committee’s charter document was worked on in more detail to define its mission and responsibilities more clearly. The Committee continued to work closely with NYSBA’s governmental relations staff and to maintain contact with counterpart committees in other Sections.

– Mike de Freitas, Chair

summer 2017 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITTEE

The Legislative Affairs Committee monitored a variety of bills in the 2017 legislative session and circulated information for comment within the Section. After a very active 2016 session, this year’s legislative session was relatively quiet. The Committee participated in Section discussions on topics of interest for possible further development, including limited liability companies and the Uniform Voidable Transactions Act. The Committee’s charter document was worked on in more detail to define its mission and responsibilities more clearly. The Commit­tee continued to work closely with NYSBA’s governmen­tal relations staff and to maintain contact with counter­part committees in other Sections

– Mike de Freitas, Chair

winter 2016 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITTEE

The Legislative Affairs Committee was active during the 2016 legislative session on matters of interest to the Section. We monitored a variety of bills, circulated information for comment within the Section, and prepared memoranda in support or opposition regarding some of the bills. Among the bills we tracked were: amendments to the Non-Profit Revitalization Act (“NPRA”); employee wage liens; local development corporations; shareholder remote communication; and donor disclosure by chari-table non-profits. The Committee also supported the Not-for-Profit Corporation Law Committee in its efforts regarding the amendments to the NPRA that passed the legislature in June and are currently awaiting the Governor’s signature.

In furtherance of the Section’s strategic plans, the Committee also prepared a charter document to more specifically describe its role and functions in the context of the existing NYSBA lobbying and legislative affairs policies and procedures.

The Committee also worked closely with NYSBA’s governmental relations staff and developed communication procedures for timely notification of relevant legislative activity. The improved communication bore fruit early, as the Committee was able to review and respond quickly to issues raised during the 2016 legislative session.

The Committee maintained contact with counterpart committees in other Sections. Issues of common interest among the Sections have arisen, such as the employee wage lien bill and the publication of private foundation annual tax return notices.

– Michael de Freitas, Chair

summer 2016 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITTEE

The Legislative Affairs Committee has joined with members of the International Law Section to form a joint legislative committee to propose repeal of Section 630 of the Business Corporation Law and Subsections (c) and (d) of Section 609 of the New York Limited Liability Company Law.  These laws make the ten largest shareholders of closely held corporations and the ten largest members of limited liability companies personally liable for wages.  The position of the joint committee is that these laws should be repealed because:

• They discourage new businesses from incorporating in New York and they act as an impediment to business and employment in the state.
• They violate the bedrock principle of shareholder and member limited liability that applies through-out the United States.
• They are unfair. Passive owners are liable jointly and severally and regardless of knowledge or fault.
• This type of wage protection is an anachronism. Workers are protected today by veil piercing principles and by labor and bankruptcy laws that did not exist when New York first imposed shareholder liability for wages in 1848

The matter has now been placed on the Agenda of the NYSBA Executive Committee, which would need to approve it before the NYSBA can undertake lobbying efforts to repeal Section 630. As noted above in the report of the Franchise, Distribution and Licensing Law Committee, the Legislative Affairs Committee is also in continuing discussions with the New York Attorney General’s Office in an effort to revise the New York Franchise Sales Act.

– Thomas M. Pitegoff, Chair

WINTER 2015 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITTEE

The Legislative Affairs Committee has joined with members of the International Law Section to form a joint legislative committee to propose repeal of Section 630 of the Business Corporation Law and Subsections (c) and (d) of Section 609 of the New York Limited Liability Company Law. These laws make the ten largest shareholders of closely held corporations and the ten largest members of limited liability companies personally liable for wages. The position of the joint committee is that these laws should be repealed because:

• They discourage new businesses from incorporating in New York and they act as an impediment to business and employment in the state.
• They violate the bedrock principle of shareholder and member limited liability that applies throughout the United States.
• They are unfair. Passive owners are liable jointly and severally and regardless of knowledge or fault.
• This type of wage protection is an anachronism. Workers are protected today by veil-piercing principles and by labor and bankruptcy laws that did not exist when New York first imposed shareholder liability for wages in 1848.

The Legislative Affairs Committee is also in continuing discussions with the New York Attorney General’s Office in an effort to revise the New York Franchise Sales Act.

– Thomas M. Pitegoff, Chair

SUMMER 2015 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITTEE

The Legislative Affairs Committee is working on three projects. The most recent is a response to a state legislative proposal to expand the reach of Section 630 of the Business Corporation Law. Assembly Bill 737 and Senate Bill 4476 would extend personal liability beyond shareholders of closely held corporations formed in New York to shareholders of closely held corporations formed in other states for unpaid services performed in New York. At its meeting May 15, 2015, the Executive Committee of the Business Law Section decided to oppose this legislation, which would discourage the establishment of new businesses in New York. The Executive Committee decided to go one step further by proposing the repeal of BCL Section 630 in its entirety because it discourages new businesses from incorporating in New York and violates the bedrock principle of shareholder limited liability that applies throughout the United States.

The Executive Committee also proposed repealing new subdivisions (c) and (d) of Section 609 of the New York Limited Liability Company Law, which were added to the law in December 2014 without the prior knowledge of the Executive Committee. That change makes the ten limited liability company members with the largest percentage ownership interest personally liable for wages and salaries of employees. Here, too, the Executive Committee proposes maintaining the principle of limited liability.

The second project is a broad revision of the New York Franchise Act. Members of the Business Law Section’s Franchise, Distribution and Licensing Law Committee and NYSBA’s Department of Governmental Relations are in continuing discussions with representatives of the New York Attorney General’s Office.

Third, members of the Business Law Section’s Not- For–Profit Corporations Law Committee are working with the Law Revision Commission, the Lawyers Alliance for New York, the New York City Bar Association and the Nonprofit Coordinating Committee of New York to amend the Not-for-Profit Corporation Law to correct practical problems, oversights and inconsistencies in the Nonprofit Revitalization Act of 2013.

– Thomas M. Pitegoff, Chair

WINTER 2014 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITEE

The Legislative Affairs Committee continues to work on two active projects. The Nonprofit Revitalization Act of 2013 became effective July 1, 2014, after a ten-year effort by the committee. Members of the Not-for-Profit Corporation Law Committee now plan to make recommendations to the New York Attorney General’s Office to clarify certain points in the Act and provide guidance to the non-profit community with respect to the Attorney General’s enforcement policies.

Second, Richard Rosen, David Oppenheim and I are continuing our discussions with key staff in the Attorney General’s Office and with legislators in Albany with the intention of introducing our proposed bill in the 2015 legislative session and hopefully seeing it through to enactment. (See the Report of the Franchise, Distribution and Licensing Law Committee.)

Kevin Kerwin, Associate Director in the NYSBA’s Department of Governmental Relations, continues to work closely with us in our dealings with the legislature and the Attorney General’s Office. We continue to monitor bills that may affect business in New York State and we welcome new ideas for legislative changes from all interested members of the Business Law Section.

The next Committee meeting was scheduled to take place January 28, 2015, at the NYSBA’s Annual Meeting. All Section members are welcome.

–Thomas M. Pitegoff, Chair

SUMMER 2014 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITEE

The Legislative Affairs Committee is proud to make two announcements. First, the Business Law Section’s years of work on modernizing New York’s Not-for-Profit Corporation Law has finally paid off, resulting last December in the enactment of the Nonprofit Revitalization Act of 2013.

The last meeting of the Legislative Affairs Committee took place on January 29, 2014, in conjunction with the NYSBA’s Annual Meeting. Frederick Attea (Partner, Phillips Lytle LLP) participated by conference call and gave a lively description of his years of work on the nonprofit law project for the NYSBA and the Business Law Section. Second, in November 2013, the NYSBA announced that the Business Law Section’s proposed revision of the New York Franchise Act had been selected as one of the Association’s 2014 legislative priorities.

Second, in November 2013, the NYSBA announced that the Business Law Section’s proposed revision of the New York Franchise Act had been selected as one of the Association’s 2014 legislative priorities.

Like the Not-for-Profit Corporation Law, the New York Franchise Act (NYFA) is enforced by the New York State Attorney General’s Office. Mr. Attea’s discussion at the last Committee meeting of his work on the nonprofit law change was especially instructive for the Committee’s pending effort to modernize the state’s franchise law.

Representatives of the Business Law Section met March 13, 2014, with key staff in the New York Attorney General’s Office to discuss the NYSBA’s proposed changes to the NYFA. I attended that meeting along with Richard Rosen and David Oppenheim. The three of us were among the five subcommittee members who drafted the franchise report for the Business Law Section in November 2009. Kevin Kerwin, Associate Director of Governmental Relations at NYSBA, organized and attended the meeting. The meeting was productive, but only the first step in a long process. We plan to follow up with the Attorney General’s Office and then to meet with state legislators.

–Thomas Pitegoff, Chair

WINTER 2013 NY BUSINESS LAW JOURNALLEGISLATIVE AFFAIRS COMMITEE

Members of the Legislative Affairs Committee met September 17, 2013. We discussed pending legislative initiatives and the committee’s role in commenting on proposed legislation that affects business in New York and initiating new proposed legislation. I suggested that the committee have a mission: to improve New York laws in ways that reinforce New York’s stature as a center of commerce. State laws should facilitate doing business in New York. They should not be an obstacle.

A major project the Business Law Section undertook some years ago was to modernize the NY Not-for-Profit Corporation Law. After years of hard work and the support of the NYSBA, the bill proposed by the Business Law Section was approved by both houses of the state legislature in the 2013 session, but at this writing had not yet been signed by the Governor.

Amendment of the New York Franchise Act is next in line. The Business Law Section proposed amendments to this law in November of 2009. The proposal would correct large portions of the law that have been preempted by the Federal Trade Commission’s trade regulation rule on franchising. It would improve the business climate in NY at no cost to taxpayers. The proposal would dramatically

eliminate traps for the unwary. The Section is seeking to have the franchise law proposal included among the NYSBA’s legislative priorities for 2014. Kevin Kerwin, Associate Director of the NYSBA’s Department of Governmental Affairs, informed the committee that the Association can lobby for a bill that has been approved by the Association’s Executive Committee regardless of whether it is one of the Association’s priorities. The Executive Committee of the NYSBA approved the proposal in January 2010.

There is plenty of room for improvement of any number New York corporations and limited liability companies and securities offerings. The committee also supports a UCC modernization bill initiated by the New York City Bar Association.

We encourage participation on the Legislative Affairs Committee from members of all other Business Law Section committees. Each committee should designate at least one person to focus on legislative needs, consider improvements to existing law, be prepared to respond to proposed legislation from others, and work with our committee.

–Thomas Pitegoff, Chair

Winter 2012 NY Business Law JournalLegislative Affairs Commitee

The Legislative Affairs Committee follows bills in the New York State legislature that are of particular interest to business lawyers. Its activities include meetings with legislators and other interested groups, and the submission of memoranda opposing or supporting bills. The Committee is most active during the legislative session from April to June each year. The Committee is currently reviewing a proposed Omnibus UCC Bill intended to bring the State of New York’s UCC law up to date and considering whether to recommend that the Association support its passage.

– Peter W. LaVigne, Chair

Summer 2012 NY Business Law JournalLegislative Affairs Committee

The Legislative Affairs Committee has been working with the Corporations Law Committee, former Section Chair Paul Silverman, and the Bar Association’s legislative staff to propose an alternative to the Senate and Assembly bills that would require New York corporations that are public companies to permit shareholders to participate and vote remotely by means of electronic communications. An alternative draft bill which, among other things, would enable but not require New York corporations to offer remote participation, was submitted to Assemblyman Kavanagh’s office, and on February 29 we had a conference call with Assemblyman Kavanagh to discuss his bill and our proposed alternative. The Committee continues to monitor proposed legislation of interest to Business Law Section members.

— Peter W. LaVigne, Chair

Winter 2011 NY Business Law JournalLegislative Affairs Committee

The Legislative Affairs Committee works with other committees to promote the Business Law Section’s interests in the New York State Legislature and in the United States Congress. It helps formulate legislative proposals and supporting memoranda, coordinate presentation to the proper legislators and committees, and articulate solid policy rationales for the enactment of those initiatives. Where appropriate, the Legislative Affairs Committee also helps set forth concerns that the Section or its constituent committees may have in regard to legislation, helps constructively to amend those proposals to create legislation that benefi ts all New Yorkers and, if and when necessary, opposes legislation.

The committee’s current projects include conveying to the New York State Legislature the practical problems arising from, and the Corporation Law Committee’s concerns about, a proposal to impose remote participation and electronic voting requirements on corporate shareholder meetings, and assisting the Franchise Distribution and Licensing Law Committee in its efforts to reform New York’s franchise statutes.—Peter LaVigne, Chair