S*1318 Session 108 (1989-1990)
S*1318(Rat #0530, Act #0446 of 1990) General Bill, By M.B. Williams
A Bill to amend Section 33-2-102, Code of Laws of South Carolina, 1976,
relating to articles of incorporation, so as to revise what the articles must
set forth; to amend Section 33-4-101, relating to corporate names, so as to
further provide for those things from which a corporate name must be
distinguishable and for the exceptions to these corporate name requirements;
to amend Section 33-7-280, relating to voting for directors and cumulative
voting, so as to provide for the circumstances when the articles of a
corporation may not be amended to remove cumulative voting; to amend Section
33-8-310, relating to director or officer conflicts of interest, so as to
further provide for those situations where a conflict of interest transaction
is not voidable by the corporation; to amend Section 33-15-101, relating to a
foreign corporation's authority to transact business in this State, so as to
further provide for this authority; to amend Section 33-15-103, relating to an
application by a foreign corporation for a certificate of authority to
transact business in this State, so as to revise what the application must set
forth; to amend Article 7, Chapter 19 of Title 33, relating to miscellaneous
regulatory provisions, so as to delete certain requirements for domestic and
foreign professional corporations to do business in this State and to delete
the requirement that annual qualification statements must be filed; to amend
Section 33-20-105, relating to savings provisions in the Corporate Code, so as
to further provide for these savings provisions; to amend Section 35-2-104,
relating to the definition of an "issuing public corporation" for purposes of
control share acquisition provisions, so as to revise this definition; to to
amend Section 35-2-213, relating to the definition of "resident domestic
corporation" for purposes of business combination provisions, so as to revise
this definition; and to amend Section 35-2-224, relating to the applicability
of business combination provisions to foreign corporations, so as to further
provide for this applicability.-amended title
02/22/90 Senate Introduced and read first time SJ-8
02/22/90 Senate Referred to Committee on Judiciary SJ-9
03/21/90 Senate Committee report: Favorable with amendment
Judiciary SJ-14
03/22/90 Senate Amended SJ-28
03/22/90 Senate Read second time SJ-31
03/22/90 Senate Ordered to third reading with notice of
amendments SJ-31
03/27/90 Senate Read third time and sent to House SJ-21
03/28/90 House Introduced and read first time HJ-205
03/28/90 House Referred to Committee on Judiciary HJ-206
04/18/90 House Committee report: Favorable Judiciary HJ-6
04/25/90 House Read second time HJ-77
04/26/90 House Read third time and enrolled HJ-8
05/01/90 Ratified R 530
05/07/90 Signed By Governor
05/07/90 Effective date 05/07/90
05/07/90 Act No. 446
06/05/90 Copies available
(A446, R530, S1318)
AN ACT TO AMEND SECTION 33-2-102, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO ARTICLES OF INCORPORATION, SO AS TO REVISE WHAT THE ARTICLES
MUST SET FORTH; TO AMEND SECTION 33-4-101, RELATING TO CORPORATE NAMES,
SO AS TO FURTHER PROVIDE FOR THOSE THINGS FROM WHICH A CORPORATE NAME
MUST BE DISTINGUISHABLE AND FOR THE EXCEPTIONS TO THESE CORPORATE NAME
REQUIREMENTS; TO AMEND SECTION 33-7-280, RELATING TO VOTING FOR DIRECTORS
AND CUMULATIVE VOTING, SO AS TO PROVIDE FOR THE CIRCUMSTANCES WHEN THE
ARTICLES OF A CORPORATION MAY NOT BE AMENDED TO REMOVE CUMULATIVE VOTING;
TO AMEND SECTION 33-8-310, RELATING TO DIRECTOR OR OFFICER CONFLICTS OF
INTEREST, SO AS TO FURTHER PROVIDE FOR THOSE SITUATIONS WHERE A CONFLICT
OF INTEREST TRANSACTION IS NOT VOIDABLE BY THE CORPORATION; TO AMEND
SECTION 33-15-101, RELATING TO A FOREIGN CORPORATION'S AUTHORITY TO
TRANSACT BUSINESS IN THIS STATE, SO AS TO FURTHER PROVIDE FOR THIS
AUTHORITY; TO AMEND SECTION 33-15-103, RELATING TO AN APPLICATION BY A
FOREIGN CORPORATION FOR A CERTIFICATE OF AUTHORITY TO TRANSACT BUSINESS
IN THIS STATE, SO AS TO REVISE WHAT THE APPLICATION MUST SET FORTH; TO
AMEND ARTICLE 7, CHAPTER 19 OF TITLE 33, RELATING TO MISCELLANEOUS
REGULATORY PROVISIONS, SO AS TO DELETE CERTAIN REQUIREMENTS FOR DOMESTIC
AND FOREIGN PROFESSIONAL CORPORATIONS TO DO BUSINESS IN THIS STATE AND
TO DELETE THE REQUIREMENT THAT ANNUAL QUALIFICATION STATEMENTS MUST BE
FILED; TO AMEND SECTION 33-20-105, RELATING TO SAVINGS PROVISIONS IN THE
CORPORATE CODE, SO AS TO FURTHER PROVIDE FOR THESE SAVINGS PROVISIONS;
TO AMEND SECTION 35-2-104, RELATING TO THE DEFINITION OF AN "ISSUING
PUBLIC CORPORATION" FOR PURPOSES OF CONTROL SHARE ACQUISITION
PROVISIONS, SO AS TO REVISE THIS DEFINITION; TO AMEND SECTION 35-2-213,
RELATING TO THE DEFINITION OF "RESIDENT DOMESTIC CORPORATION"
FOR PURPOSES OF BUSINESS COMBINATION PROVISIONS, SO AS TO REVISE THIS
DEFINITION; AND TO AMEND SECTION 35-2-224, RELATING TO THE APPLICABILITY
OF BUSINESS COMBINATION PROVISIONS TO FOREIGN CORPORATIONS, SO AS TO
FURTHER PROVIDE FOR THIS APPLICABILITY.
Be it enacted by the General Assembly of the State of South Carolina:
Requirements of articles revised
SECTION 1. Section 33-2-102(a)(6) of the 1976 Code, as added by Act
444 of 1988, is amended to read:
"(6) a certificate, signed by an attorney licensed to practice
in this State, that all of the requirements of this section have been
complied with."
Corporate name requirements revised
SECTION 2. Section 33-4-101(b) of the 1976 Code, as added by Act 444
of 1988, is amended to read:
"(b) Except as authorized by subsections (c) and (d), a
corporate name must be distinguishable upon the records of the Secretary
of State from:
(1) the corporate name of a corporation incorporated or
authorized to transact business in this State;
(2) a corporate name reserved or registered under Section
33-4-102 or 33-4-103;
(3) the fictitious name adopted by a foreign corporation
authorized to transact business in this State because its real name is
unavailable;
(4) the corporate name of a not-for-profit corporation
incorporated or authorized to transact business in this State;
(5) the name of a limited partnership authorized to transact
business in this State."
Exemptions from corporate name requirements revised
SECTION 3. Section 33-4-101(f) of the 1976 Code, as added by Act 444
of 1988, is amended to read:
"(f) The following corporations are exempt from subsection
(a)(1):
(1) a bank, building and loan association, savings and loan
association, insurance company, public utility, and railroad;
(2) a corporation which was organized before January 1, 1964,
and whose charter or articles of incorporation on the effective date of
this Business Corporation Act of 1988 specified a corporate name that
would not meet the requirements of subsection (a) of this section, may
continue to use that name as its official name;
(3) nonprofit corporation; and
(4) a professional corporation governed by Chapter 19 of this
title, but the name of the professional corporation must comply with
Section 33-19-150."
Reporters' comments revised
SECTION 4. Item (3) of the South Carolina Reporters' Comments to
Section 33-4-101 of the 1976 Code, as added by Act 444 of 1988, is
amended to read:
"(3) Exemptions from the requirement that 'Inc.' or a similar
designation be included as part of the official corporate name.
Subsection (f)(1) carries forward the provision in Section
33-5-10(b) of the 1981 act, originally enacted as part of the 1962 act,
that exempts banks, savings institutions, insurance companies, public
utilities, and railroads from the requirement that their official
corporate name include the term 'corporation,' 'incorporated,' 'company,'
or 'limited' or an abbreviation of one of these terms. Moreover, many
industrial and mercantile corporations formed before the 1962 act had no
such term in their official corporate name. The 1962 act exempted these
corporations from the name designation requirement. This exemption was
carried forward in the 1981 act and has been continued in this act in
subsection (f)(2).
Subsection (f)(3) makes it clear that nonprofit corporations do not
have to use the designation 'corporation' and the like in their official
corporate name. See Section 33-20-103. Hospitals, educational
institutions, and the like traditionally have not used such designations,
and there are no compelling public policy reasons why they should be
required to do so.
Subsection (f)(4) exempts professional corporations from the
designations required in subsection (a), but requires professional
corporations to include in the articles of incorporation one of the
special designations in Section 33-19-150 as part of their official
corporate name.
The exemptions in subsection (f) are only with respect to the
requirement in subsection (a)(1). Corporations qualifying for one of the
exemptions must nevertheless meet all the remaining requirements in this
section, e.g., subsection (b) which requires that the name of a
corporation be distinguishable from the name of all other corporations
and limited partnerships on file in the office of the South Carolina
Secretary of State."
Director's conflict of interest
SECTION 5. Section 33-8-310(a)(1) of the 1976 Code, as added by Act
444 of 1988, is amended to read:
"(1) the material facts of the transaction and the director's
interest were disclosed or known to the board of directors or a committee
of the board of directors, and the board of directors or a committee
authorized, approved, or ratified the transaction;".
Contents of application for certificate of authority to transact business
revised
SECTION 6. Section 33-15-103(a)(8) of the 1976 Code, as added by Act
444 of 1988, is amended to read:
"(8) a certificate, signed by an attorney licensed to practice
in this State, that, in the opinion of the attorney, all of the
requirements of this section relating to the application for
authorization of foreign corporations to do business in this State have
been complied with."
Regulatory provisions revised
SECTION 7. Article 7, Chapter 19, Title 33 of the 1976 Code, as
added by Act 444 of 1988, is amended to read:
"Article 7
Miscellaneous Regulatory Provisions
Section 33-19-600. The annual report required by Section 33-16-220
for each domestic professional corporation and for each foreign
professional corporation authorized to transact business in this State
must include a statement that all of its shareholders, not less than
one-half of its directors, and all of its officers other than its
secretary and treasurer, if any, are qualified persons with respect to
the corporation.
Section 33-19-610. Each licensing authority is empowered to
promulgate rules expressly authorized by this chapter if the rules are
consistent with the public interest or required by the public health or
welfare or by generally recognized standards of professional conduct.
Section 33-19-620. This chapter does not restrict the jurisdiction
of a licensing authority over individuals rendering a professional
service within the jurisdiction of the licensing authority nor does it
affect the interpretation or application of any law pertaining to
standards of professional conduct.
Section 33-19-630. (a) A person commits an offense if he signs a
document he knows is false in any material respect with intent that the
document be delivered to the licensing authority for filing.
(b) An offense under this section is a misdemeanor punishable by
a fine of not to exceed five hundred dollars.
(c) The offense created by this section is in addition to any
other offense created by law for the same conduct."
Savings provisions revised
SECTION 8. Section 33-20-105(a)(4) of the 1976 Code, as added by Act
444 of 1988, is amended to read:
"(4) any proceeding, reorganization, or dissolution commenced
under the statute before its repeal and the proceeding, reorganization,
or dissolution may be completed in accordance with the statute as if it
had not been repealed."
Definition revised
'
SECTION 9. Section 35-2-104(a) of the 1976 Code, as added by Act 444
of 1988, is amended to read:
"(a) As used in this article, 'issuing public corporation'
means a domestic corporation that has either:
(1) a class of voting shares registered with the Securities
and Exchange Commission or another federal agency under Section 12 of the
1934 Exchange Act; and
(2) its principal place of business, its principal office,
or substantial assets within South Carolina; and either:
(A) more than ten percent of its shareholders resident
in South Carolina;
(B) more than ten percent of its shares owned by South
Carolina residents; or
(C) ten thousand shareholders resident in South
Carolina."
Definition revised
SECTION 10. Section 35-2-213(a) of the 1976 Code, as added by Act 444
of 1988, is amended to read:
"(a) As used in this article, 'resident domestic corporation'
means a domestic corporation that has a class of voting shares registered
with the Securities and Exchange Commission or another federal agency
under Section 12 of the 1934 Exchange Act."
Applicability of business combination provisions revised
SECTION 11. Section 35-2-224(a) of the 1976 Code, as added by Act 444
of 1988, is amended to read:
"(a) The provisions of this article also apply to a foreign
corporation incorporated in any state other than South Carolina that has:
(1) a class of voting shares registered with the Securities
and Exchange Commission or another federal agency under Section 12 of the
1934 Exchange Act; and
(2) its principal place of business, its principal office,
or more than forty percent of its assets within South Carolina; and
either:
(A) more than ten percent of its shareholders resident
in South Carolina;
(B) more than ten percent of its shares owned by South
Carolina residents; or
(C) ten thousand shareholders resident in South
Carolina."
Cumulative voting
SECTION 12. Section 33-7-280 of the 1976 Code, as added by Act 444 of
1988, is amended by adding a new subsection (d) to read:
"(d) The articles of a corporation may not be amended to
remove cumulative voting if the votes cast against the amendment would
be sufficient to elect a director to the board of directors if
cumulatively voted at an election of the entire board of directors, or,
if there are classes of directors, at an election of a director of any
class of directors."
Foreign corporation's authority to transact business revised
SECTION 13. Section 33-15-101(b) of the 1976 Code, as added by Act
444 of 1988, is amended to read:
"(b) The following activities, among others, do not constitute
transacting business within the meaning of subsection (a):
(1) maintaining, defending, or settling any proceeding;
(2) holding meetings of the board of directors or
shareholders or carrying on other activities concerning internal
corporate affairs;
(3) maintaining bank accounts;
(4) maintaining offices or agencies for the transfer,
exchange, and registration of the corporation's own securities or
maintaining trustees or depositories with respect to those securities;
(5) selling through independent contractors;
(6) soliciting or obtaining orders, whether by mail or
through employees or agents or otherwise, if the orders require
acceptance outside this State before they become contracts;
(7) creating or acquiring any indebtedness, mortgages,
and security interests in real or personal property;
(8) securing or collecting any debts or enforcing
mortgages, security interests, or any other rights in property securing
debts;
(9) owning, without more, real or personal property;
(10) conducting an isolated transaction that is
completed within thirty days and that is not one in the course of
repeated transactions of a like nature;
(11) transacting business in interstate commerce; or
(12) owning and controlling a subsidiary corporation
incorporated in or transacting business within this State."
Reporters' comments revised
SECTION 14. Item (4) of the South Carolina Reporters' Comments to
Section 33-15-101 of the 1976 Code, as added by Act 444 of 1988, is
amended to read:
"(4) Nonmodel Act Provisions
Since 1962, a foreign parent has not been required to qualify merely
because it owned a South Carolina subsidiary. The Official Comments to
the Model Act suggest that this activity should be exempt. Therefore,
for clarification, the prior South Carolina provision has been retained
as new subsection (b)(12). This provision was originally derived from
the provisions of Cal. Corporate Code Section 6301. See LaVarre
v. International Paper Company 37 F. 2d 141 (E.D.S.C. 1929).
Likewise, the mere leasing of South Carolina real property from a
nonqualified corporation to its South Carolina subsidiary does not
require the parent to qualify to do business in South Carolina since the
general rule is that the mere holding and leasing of property by a
foreign corporation is an isolated incident and not the conduct of
business, unless the corporation is in the business generally of buying
and leasing real property. Further, the parent and subsidiary are
treated as separate entities unless it would appear proper to 'pierce the
corporate veil'. 1977 Op. S.C. Att'y Gen., 233, (#77-305).
Subsection (8) of the Official Text of Model Act Section 15.01
dealing with enforcing mortgages and loans has been slightly broadened
in keeping with prior South Carolina law (Section 35-23-10(b)(6) of the
1981 South Carolina Business Corporation Act). Subsection (8) permits
out-of-state lenders to enforce not only mortgages and security interests
but also 'any rights' in the property.
The first sentence of Official Comment #6 to Section 33-15-101 does
not reflect the interpretation intended to be given to Section
33-15-101(b)(7). South Carolina has for years employed model act
language to designate that the creation of indebtedness, mortgages and
security interests, without more, does not constitute transacting
business. Different from the first sentence of Official Comment #6, the
current language, and the predecessor phraseology (which essentially was
identical wording) is not limited to only those foreign corporations
which are not in the business of making loans. A foreign corporate
lender which is in the business of making loans, but which only conducts
those activities listed in Section 33-15-101(b)(7), e.g., does not also
have an office in South Carolina or employees within the State, is not
deemed to be doing business in South Carolina. See, 1966 Op. S.C. Att'y
Gen. 27 (#1977).
However, the purchase of mortgage notes and mortgages by an
out-of-state bank or mortgage pool has historically not been viewed as
the transaction of business in South Carolina. This is true even though
the out-of-state mortgage buyer might be required to pursue foreclosure
actions and might be required to take possession of the properties and
rent them pending their sale in foreclosure. See 1964 Op. S.C. Att'y
Gen. 119 (#1674)."
Time effective
SECTION 15. This act takes effect upon approval by the Governor.
Approved the 7th day of May, 1990.
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