STATE OF NEW YORK ________________________________________________________________________ 5795 2025-2026 Regular Sessions IN ASSEMBLY February 20, 2025 ___________ Introduced by M. of A. HYNDMAN -- read once and referred to the Commit- tee on Corporations, Authorities and Commissions AN ACT to amend the not-for-profit corporation law, in relation to the indemnification of directors, officers and key persons; and to repeal sections 721, 722 and 723 of the not-for-profit corporation law relat- ing thereto The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Sections 721, 722 and 723 of the not-for-profit corporation 2 law are REPEALED. 3 § 2. The not-for-profit corporation law is amended by adding a new 4 section 721 to read as follows: 5 § 721. Authorization for indemnification of directors, officers or key 6 persons; insurance. 7 (a) A corporation may indemnify any director, officer or key person 8 against expenses, including judgments, fines, excise taxes, amounts paid 9 in settlement, attorneys' fees, court costs and disbursements actually 10 and necessarily incurred as a result of action or proceeding, or any 11 appeal thereof, arising out of service as a director, officer or key 12 person (1) who was or is a party or is threatened to be made a party to 13 any threatened, pending or contemplated action or proceeding, or any 14 appeal thereof, whether civil, criminal, administrative or investigative 15 (including an action by or in the right of the corporation and/or by its 16 members, if any, or in the right of any other corporation of any kind, 17 domestic or foreign and/or by its members, if any), or by any partner- 18 ship, joint venture, trust, employee benefit plan or other enterprise; 19 and (2) who has met the standards of conduct set forth in section 717 20 (duty of directors and officers and key persons) and elsewhere in this 21 article and who is entitled to the protection of section 720-a of this 22 article (liability of directors, officers, key persons and trustees) to 23 the extent applicable, and (3) with respect to any criminal action or EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD06016-01-5
A. 5795 2 1 proceeding, who had reasonable cause to believe that their conduct was 2 lawful. A director, officer or key person who may be indemnified under 3 this section shall include a person (i) whose testator or intestate is 4 or was a director, officer or key person of the corporation, or (ii) who 5 is or was serving in any capacity at the request of the corporation as a 6 director, officer or key person of another corporation, partnership, 7 joint venture, trust, estate, employee benefit plan or other enterprise. 8 (b) The termination of any action or proceeding, including an action 9 by or in the right of the corporation and/or by its members, by judg- 10 ment, order, settlement, adjudging liability to the director, officer or 11 key person, conviction or upon a plea of nolo contendere or its equiv- 12 alent shall not necessarily create a presumption that the (1) director, 13 officer or key person did not act in accordance with the standards of 14 care set forth in paragraph (a) of this section, and (2) with respect to 15 any criminal action or proceeding, did not have reasonable cause to 16 believe that the director's, officer's or key person's conduct was 17 unlawful. 18 (c) No indemnification shall be made by the corporation if such direc- 19 tor, officer or key person shall have been adjudged to be liable, 20 including liability to the corporation, unless and only to the extent 21 that the court, in which such action or proceeding was brought, shall 22 determine, upon application, that, despite the adjudication of liability 23 but in view of all the circumstances of the case, such director, officer 24 or key person is fairly and reasonably entitled to indemnification with 25 respect to all or any of the judgments, fines, excise taxes, amounts 26 paid in settlement, attorneys' fees, court costs and disbursements actu- 27 ally and necessarily incurred, because the director, officer or key 28 person had made a good faith effort to meet the standards of conduct set 29 forth in this article. 30 (d) Expenses, including attorneys' fees, court costs and disburse- 31 ments, incurred by a director, officer or key person of the corporation 32 or by persons serving at the request of the corporation as directors, 33 officers or key persons of another corporation, partnership, joint 34 venture, trust or other enterprise, in defending any civil, criminal, 35 administrative or investigative action or proceeding, arising out of 36 such service, may be paid, if authorized in accordance with paragraph 37 (e) of this section, in advance of the final disposition of such action 38 or proceeding, upon receipt by the corporation of an undertaking in 39 accordance with article 25 of the civil practice law and rules by or on 40 behalf of such director, officer or key person to repay such amount if 41 they shall ultimately be determined not to be entitled to be indemnified 42 as authorized in this section. 43 (e) Any indemnification or advancement under this section, except for 44 one ordered by a court, shall be made only in the specific action or 45 proceeding upon a determination that indemnification of the present or 46 former director, officer or key person is proper in the circumstances 47 because the person has met or in the case of an advance can be reason- 48 ably expected to meet the applicable standard of conduct set forth in 49 paragraph (a) of this section: 50 (1) by a majority vote of the directors of the corporation who are not 51 parties to such action or proceeding, even though less than a quorum; 52 (2) by a committee of such directors designated by majority vote of 53 such directors, even though less than a quorum; 54 (3) if there are no such directors, or if such directors so direct, by 55 independent legal counsel in a reasoned written opinion; or 56 (4) by the members, if any.
A. 5795 3 1 (f) A right to indemnification or to advancement of expenses arising 2 under a provision of the certificate of incorporation, a bylaw or a 3 resolution of the board or of a committee thereof shall not be elimi- 4 nated or impaired by an amendment to the certificate of incorporation to 5 the bylaws or to the resolution after the occurrence of the act or omis- 6 sion that is the subject of the civil, criminal, administrative or 7 investigative action or proceeding for which indemnification or advance- 8 ment of expenses is sought, unless the provision in effect at the time 9 of such act or omission explicitly authorizes such elimination or 10 impairment after such action or omission has occurred. 11 (g) A corporation may purchase and maintain insurance on behalf of any 12 person who is or was a director, officer or key person of the corpo- 13 ration, or is or was serving at the request of the corporation as a 14 director, officer or key person of another corporation, partnership, 15 joint venture, trust, estate, employee benefit or other enterprise, 16 against any liability asserted against such person and incurred by such 17 person in any such capacity, or arising out of such person's status as 18 such, whether or not the corporation would have the power to indemnify 19 such person against such liability under this section. 20 (h) For purposes of this section, references to "the corporation" 21 shall include, in addition to a consolidated or surviving corporation, 22 any constituent corporation, including any constituent of a constituent, 23 absorbed in a consolidation or merger which, if its separate existence 24 had continued, would have had power and authority to indemnify its 25 directors, officers or key persons that any person who is or was a 26 director, officer or key person of such constituent corporation, or is 27 or was serving at the request of such constituent corporation as a 28 director, officer or key person of another corporation, partnership, 29 joint venture, trust, estate, employee benefit plan or other enterprise, 30 shall stand in the same position under this section with respect to the 31 resulting or surviving corporation as such person would have with 32 respect to such constituent corporation if its separate existence had 33 continued. 34 (i) The indemnification and advancement of expenses provided by, or 35 granted pursuant to, this section shall continue as to a person who has 36 ceased to be a director, officer or key person and shall inure to the 37 benefit of their heirs, executors and administrators if that person was 38 a director, officer or key person at the time the cause of action or 39 claim arose or prosecution was threatened or information or indictment 40 was filed. 41 (j) For the purpose of this section, a corporation shall be deemed to 42 have requested a person to serve an employee benefit plan where the 43 performance by such person of their duties to the corporation also 44 imposes duties on, or otherwise involves services by, such person to the 45 plan or participants or beneficiaries of the plan; excise taxes assessed 46 on a person with respect to an employee benefit plan pursuant to appli- 47 cable law shall be considered fines; and action taken or omitted by a 48 person with respect to an employee benefit plan in the performance of 49 such person's duties for a purpose reasonably believed by such person to 50 be in the interest of the participants and beneficiaries of the plan 51 shall be deemed to be for a purpose which is not opposed to the best 52 interests of the corporation. 53 § 3. Section 724 of the not-for-profit corporation law, as amended by 54 chapter 368 of the laws of 1987, paragraph (a) as amended by chapter 549 55 of the laws of 2013, is renumbered section 722 and amended to read as 56 follows:
A. 5795 4 1 § 722. Indemnification of directors [and], officers or key persons by a 2 court. 3 (a) Notwithstanding the failure of a corporation to provide indemnifi- 4 cation, and despite any contrary resolution of the board, of a committee 5 thereof or of the members in the specific case under section [723] 721 6 [(Payment of indemnification other than by court award)] (Authorization 7 for indemnification of directors, officers or key persons; insurance), 8 indemnification [shall] may be awarded by a court to the extent author- 9 ized under section [722 (Authorization for indemnification of directors 10 and officers), and paragraph (a) of section 723 (Payment of indemnifica- 11 tion other than by court award)] 721 (Authorization for indemnification 12 of directors, officers or key persons; insurance). Application therefor 13 shall be made on notice to the attorney general and may be made, in 14 every case, either: 15 (1) In the civil action or proceeding in which the expenses were 16 incurred or other amounts were paid, or 17 (2) To the supreme court in a separate proceeding, in which case the 18 application shall set forth the disposition of any previous application 19 made to any court for the same or similar relief and also reasonable 20 cause for the failure to make application for such relief in the action 21 or proceeding in which the expenses were incurred or other amounts were 22 paid. 23 (b) The application shall be made in such manner and form as may be 24 required by the applicable rules of court or, in the absence thereof, by 25 direction of a court to which it is made. Such application shall be upon 26 notice to the corporation. The court may also direct that notice be 27 given at the expense of the corporation to the members and such other 28 persons as it may designate in such manner as it may require. 29 (c) Where indemnification is sought by judicial action, the court may 30 allow a person such reasonable expenses, including attorneys' fees, 31 during the pendency of the litigation as are necessary in connection 32 with [his] their defense therein, if the court shall find that the 33 defendant has by [his] their pleadings or during the course of the liti- 34 gation raised genuine issues of fact or law. 35 § 4. Section 725 of the not-for-profit corporation law is renumbered 36 section 723. 37 § 5. The section heading and subdivision (a) of section 723 of the 38 not-for-profit corporation law, as amended by chapter 368 of the laws of 39 1987 and such section as renumbered by section 4 of this act, are 40 amended to read as follows: 41 Other provisions affecting indemnification of directors [and], offi- 42 cers and key persons. 43 (a) All expenses incurred in defending a civil or criminal action or 44 proceeding which are advanced by the corporation under paragraph [(c)] 45 (d) of section [723] 721 [(Payment of indemnification other than by 46 court award)] (Authorization for indemnification of directors, officers 47 or key persons; insurance) or allowed by a court under paragraph (c) of 48 section [724 (Indemnification of directors and officers by a court)] 722 49 (Indemnification of directors, officers or key persons by a court) shall 50 be repaid in case the person receiving such advancement or allowance is 51 ultimately found, under the procedure set forth in this article, not to 52 be entitled to indemnification or, where indemnification is granted, to 53 the extent the expenses so advanced by the corporation or allowed by the 54 court exceed the indemnification to which [he is] they are entitled. 55 § 6. Section 720-a of the not-for-profit corporation law, as amended 56 by chapter 445 of the laws of 2019, is amended to read as follows:
A. 5795 5 1 § 720-a. Liability of directors, officers, trustees and key persons. 2 Except as provided in sections [seven hundred nineteen] 719 and [seven 3 hundred twenty] 720 of this chapter, and except any action or proceeding 4 brought by the attorney general or, in the case of a charitable trust, 5 an action or proceeding against a trustee brought by a beneficiary of 6 such trust, no person serving without salary or other compensation as a 7 director, officer, key person or trustee of a corporation, association, 8 organization or trust described in section 501 (c) (3) of the United 9 States internal revenue code shall be liable to any person other than 10 such corporation, association, organization or trust based solely on 11 [his or her] their conduct in the execution of such office unless the 12 conduct of such director, officer, key person or trustee with respect to 13 the person asserting liability constituted gross negligence or was 14 intended to cause the resulting harm to the person asserting such 15 liability. For purposes of this section, such a director, officer, key 16 person or trustee shall not be considered compensated solely by reason 17 of payment of [his or her] their actual expenses incurred in attending 18 meetings or otherwise in the execution of such office. 19 § 7. The rights to indemnification that accrued prior to the effective 20 date of this act shall be determined by the not-for-profit corporation 21 law as then in effect, unless the director, officer or key person 22 elects to have those rights or obligations determined by the not-for- 23 profit corporation law as amended by this act. 24 § 8. This act shall take effect on the first of January next succeed- 25 ing the date on which it shall have become a law.