Section 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.