Amendments to New York’s Not-For-Profit Corporation Law are set to take effect on May 27. The amendments impact several provisions of The New York Nonprofit Revitalization Act (“NRA”), which imposed substantial governance requirements on nonprofits when it took effect in 2014. The amendments build greater flexibility into aspects of the NRA that were viewed as overly broad or prescriptive. Key elements of the amendments are summarized below. A redline showing the changes to the statutory language is available here. Nonprofits incorporated in New York, and other nonprofits that may be subject to the Not-For-Profit Corporation Law due to their activities, should take note of the amendments and consider whether changes to their governance practices and documents are appropriate. 1. Related party transactions. The NRA provides for enhanced board oversight of related party transactions. The amendments explicitly permit an authorized committee of the board to review and approve related party transactions, as an alternative to full board approval. They also codify exceptions to the definition of “related party transaction” that are based on guidance previously issued by the Charities Bureau of the New York Attorney General’s office (available here). These exceptions mean that immaterial or ordinary course transactions are no longer subject to the board/committee approval procedures under the NRA. Specifically, the exceptions cover: (a) transactions that are themselves “de minimis” or where the related party’s financial interest is de minimis, with the judgment of what is de minimis to be left to individual nonprofits based on factors such as size and budget; (b) transactions that “would not customarily be reviewed” by the board at “similar organizations in the ordinary course of business” and that are available to others on the same or similar terms; and (c) transactions where a related party receives a benefit as a result of being a member of a class that benefits from the nonprofit’s work, where the benefit is available to all similarly situated members of the class on the same terms. The amendments also create a defense to actions brought by the New York Attorney General challenging related party transactions. The defense allows nonprofits to take steps to ratify transactions that were not approved in accordance with the procedures in the NRA, and to enhance their mechanisms for complying with these procedures in the future, in order to limit the possibility of adverse actions against nonprofits for inadvertent or insignificant violations of the related party provisions. 2. Audit committee independence requirements. The amendments modify the definition of “independent director,” which applies to directors serving on the audit committee, by amending the standard on business relationships between a nonprofit and entities where directors (or their relatives) have relationships. Currently, this standard prohibits a director from being independent if the director is an employee of, or has a substantial financial interest in, an entity that does business with the nonprofit, if the amount of business exceeded the lesser of $25K or 2% of the other entity’s consolidated gross revenues in any of the last three fiscal years. The amendments provide tiered thresholds that are tied to the revenues of the other entity, as follows: