2023 New York Laws › MHY - Mental Hygiene › Title E - General Provisions › Article 31 - Regulation and Quality Control of Services for the Mentally Disabled › 31.22 - Approval of Certain Certificates of Incorporation or Articles of Organization; Granting of Operating Certificates.

§ 31.22 Approval of certain certificates of incorporation or articles of
organization; granting of operating certificates.
(a)  No  certificate  of incorporation of a business or not-for-profit
corporation, or articles of organization of a limited liability company,
shall hereafter be filed which includes among its corporate purposes  or
powers  the  establishment  or  operation  of  a  facility  for which an
operating certificate is required by this article from the  commissioner
of  the office of mental health or the solicitation of contributions for
any such purpose, except with the written approval of  the  commissioner
and,  when  otherwise  required by law, the approval of a justice of the
supreme  court  endorsed  on  or   annexed   to   the   certificate   of
incorporation.
(b)  An  application  for  approval  of  the  proposed  certificate of
incorporation or articles  of  organization  shall  be  filed  with  the
commissioner  together with such other forms and information as shall be
prescribed by, or acceptable to, the commissioner.
The commissioner shall not approve a certificate of  incorporation  or
articles  of organization or grant an operating certificate unless he is
satisfied, insofar as applicable, as to (1)  the  public  need  for  the
services  or  the  facility  which  the proposed corporation or proposed
provider of services is empowered to perform or maintain at the time and
place  and  under  the  circumstances  proposed;  (2)   the   character,
competence  and standing in the community of the proposed incorporators,
directors,  sponsors,  stockholders,  members,  managers,  partners,  or
operators,  provided  that in making such determination the commissioner
is authorized to consider whether or not, within ten years of  the  date
of  the application, any such persons have been denied renewal for cause
of an operating  certificate,  or  have  had  an  operating  certificate
revoked   or  suspended  for  cause,  and  such  denial,  revocation  or
suspension was not reversed after an  administrative  hearing  or  other
appeal,  for  a  program  or  facility licensed or operated by a health,
mental hygiene, social services or education  agency  or  department  of
this  or  any  state  or  have  failed  to operate a program serving the
mentally disabled, other disabled  persons  as  defined  in  subdivision
twenty-one  of  section two hundred ninety-two of the executive law, the
aged, children  or  other  persons  receiving  health,  mental  hygiene,
residential,  social  or  educational  services in continuous compliance
with applicable laws or regulations within the previous ten years in any
state; (3) the  financial  resources  of  the  proposed  corporation  or
proposed  provider  of  services and its sources of future revenues; (4)
the availability of facilities or services which may serve as alternates
or  substitutes  for  the  facility  or  services  which  the   proposed
corporation or proposed provider of services is empowered to maintain or
render;  (5) such other matters as he shall deem pertinent in the public
interest. The commissioner in  approving  the  proposed  certificate  of
incorporation  or  articles  of  organization  or  issuing  the proposed
operating certificate may request and consider  information  and  advice
from  all  available  sources including local and regional mental health
and health planning agencies and groups as  to  the  matters  set  forth
herein.  If  the  commissioner proposes to disapprove the application he
shall afford the applicant an opportunity to request a  public  hearing.
The commissioner shall not take any action contrary to the advice of the
health  systems agency for facilities other than community residences or
residential care centers for adults until he affords an  opportunity  to
the  agency  to  request a public hearing and, if so requested, a public
hearing shall be held. The commissioner, on his own motion, may  hold  a
public  hearing on the application. Any public hearings held pursuant to

this  subdivision  may  be  conducted  by  the  commissioner  or  by  an
individual designated by the commissioner.
(c)  (1)  Any change in the person or entity which is the holder of an
operating certificate of a facility for which an  operating  certificate
has  been  issued  pursuant  to  this  article  shall be approved by the
commissioner in accordance with the provisions of this  subdivision  and
subdivisions  (a)  and  (b)  of  this section, except that: (i) any such
change shall be subject to approval by the  commissioner  in  accordance
with  paragraph two of subdivision (b) of this section only with respect
to the new person or entity, and any remaining persons or  entities  who
have  not  been previously approved for that facility in accordance with
such paragraph; and (ii)  any  such  change  shall  not  be  subject  to
paragraph one of subdivision (b) of this section.
(2)  Any  transfer,  assignment or other disposition of ten percent or
more of the stock, membership interest or voting rights thereunder of  a
corporation  or  a  limited  liability company which is the holder of an
operating certificate for a facility providing mental  hygiene  services
or  any transfer, assignment or other disposition of the stock or voting
rights thereunder of such a corporation which results in  the  ownership
or  control  of  more than ten percent of the stock, ownership or voting
rights thereunder of such corporation or limited  liability  company  by
any  person  shall  be  subject  to  approval  by  the  commissioner  in
accordance with the provisions of this subdivision and subdivisions  (a)
and  (b)  of this section and rules and regulations promulgated pursuant
thereto. In the absence of such approval, the operating  certificate  of
such facility shall be subject to revocation or suspension, except that:
(i)   any   such  transaction  shall  be  subject  to  approval  by  the
commissioner in accordance with paragraph two of subdivision (b) of this
section only with  respect  to  a  new  stockholder,  member  or  a  new
principal  stockholder;  and  (ii)  any  such  transaction  shall not be
subject to paragraph one of subdivision (b) of this section.
(3) No operating certificate shall be  issued  for  a  facility  which
would  be  operated by any partnership or limited liability company, any
of the members of which are not natural persons.
(4) No operating certificate shall be  issued  for  a  facility  which
would be operated by a corporation any of the stock of which is owned by
another  corporation  or a limited liability company any of the stock of
which is owned by another corporation.
(d) Where the approval required by subdivision (a) of this section has
not been obtained, the commissioner may institute and maintain an action
in the supreme court through the attorney general to procure a  judgment
dissolving   and   vacating   or   annulling   (1)  the  certificate  of
incorporation of any such corporation or articles of organization of any
such limited liability company, or (2) the certificate of  incorporation
of  any  corporation  or  articles  of  organization of any such limited
liability company hereafter incorporated or formed, the name,  purposes,
objectives,  or activities of which in any manner may reasonably lead to
the belief that the corporation or limited liability  company  possesses
or may exercise any of such purposes.