Nonprofit Director Conflict Transaction Approval Rules in New York
At a glance
| Governing act and covered transactions | Not-for-Profit Corporation Law; related party transactions involving corporation or affiliate (§§ 102(a)(24), 715(a)) |
|---|---|
| Interest and related-person trigger | Financial interest of director, officer, key person, relative, or specified owned entity; de minimis and other exclusions (§ 102(a)(23)-(24)) |
| Disclosure and knowledge | Interested director, officer, or key person discloses material interest facts in good faith to board or committee (§ 715(a)) |
| Board or committee approval | Board/authorized committee fairness, reasonableness, best-interest determination; charitable substantial-interest cases add alternatives, majority of those present, written basis (§ 715(a)-(b)) |
| Member approval and vote | § 715(a)-(b) assigns transaction review to board or authorized committee; no member safe-harbor vote stated there |
| Fairness route and time | Fair, reasonable, and best interest when determined; fairness defense at approval time in non-AG action (§ 715(a), (i)) |
| Interested participation and quorum | Related party may give background or answer questions before deliberation, but may not deliberate or vote (§ 715(h)) |
| Burden, effect, and separate authorization | AG may seek injunction, voiding, rescission, restitution, and other statutory relief; non-AG fairness defense (§ 715(f), (i)) |
| Special coverage and later changes | Charitable substantial-interest procedure and corporation conflict policy (§§ 715(b), 715-a(a)-(b)) |
Requirements one by one
Who is covered
Section 102(a)(23) defines related parties, and § 102(a)(24) defines the covered transaction to include directors, officers, key persons, their relatives, and entities meeting the specified ownership thresholds. A related party transaction requires a financial interest and participation by the corporation or an affiliate. The definition excludes de minimis interests and two other specified categories; whether particular facts qualify requires review.
Review before the transaction
Section 715(a) requires the board or an authorized committee to determine that a related party transaction is fair, reasonable, and in the corporation's best interest. An interested director, officer, or key person discloses the material facts of the interest in good faith. For a charitable corporation with a related party's substantial financial interest, § 715(b) adds pre-transaction consideration of available alternatives, approval by at least a majority of directors or committee members present, and contemporaneous written documentation of the basis.
What trips people up
Under § 715(h), a related party can supply background or answer questions before deliberation, but cannot take part in the deliberation or vote. The general conflict policy in § 715-a(a) and § 715-a(b) calls for broader disclosure and abstention procedures; the transaction-specific review still has to satisfy § 715. The Attorney General can seek the remedies named in § 715(f), and § 715(i) describes a fairness defense in an action brought by someone else.
Common questions
Can a nonprofit set stricter conflict procedures? Section 715(c) expressly permits added restrictions and review procedures in the certificate, bylaws, or board policy.
Does a member vote replace board review? Section 715(a)-(b) places this transaction determination with the board or an authorized committee. A governing document may add procedures under § 715(c).
Statutes and sources
- N.Y. Not-for-Profit Corp. Law § 102(a)(23)-(24) — “Related party transaction” means any transaction, agreement or any other arrangement in which a related party has a financial interest and in which the corporation or any affiliate of the corporation is a participant. New York Senate. Accessed 2026-10-02.
- N.Y. Not-for-Profit Corp. Law § 715(a)-(b), (f), (h)-(i) — “No corporation shall enter into any related party transaction unless the transaction is determined by the board, or an authorized committee thereof, to be fair, reasonable and in the corporation's best interest at the time of such determination.” New York Senate. Accessed 2026-10-02.
- N.Y. Not-for-Profit Corp. Law § 715-a(a)-(c) — “the board shall adopt, and oversee the implementation of, and compliance with, a conflict of interest policy”. New York Senate. Accessed 2026-10-02.
Source links
Every statute quoted above, linked, with the date we checked it.
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