New York Amends Ownership Restrictions for DPCs

On July 21, 2022, an amendment to New York Business Corporation Law (BCL) was signed into law by the New York Governor on July 21, 2022, which will take effect as of July 21, 2024 (2022 N.Y. Laws Chapter 439 §5), which amendment will allow 100% ownership of design professional service corporations (DPCs) by one or more employee stock ownership plans (ESOPs).

This is a significant departure from the current ESOP ownership limitations of just below 25%. 100% ownership will only be permitted in situations where the ESOP meets the New York licensee management requirements further specified below. An ESOP that does not meet these requirements will remain limited to below 25% ownership (and cannot be the single largest shareholder).

The legislation allows a DPC to go up to 100% ESOP ownership IF at least 75% of the ESOP trustees are licensees (Architects, engineers, geologists, surveyors, landscape architects) OR at least 75% of the plan committee are licensees. The firm must still meet existing DPC governance rules, specifically that 75% of the officers and directors be licensees, that the board chair be a licensee and that the President & CEO be a licensee.