South Carolina General Assembly
111th Session, 1995-1996

Bill 4015


                    Current Status

Bill Number:                    4015
Ratification Number:            184
Act Number:                     123
Type of Legislation:            General Bill GB
Introducing Body:               House
Introduced Date:                19950412
Primary Sponsor:                Wilkins
All Sponsors:                   Wilkins
Drafted Document Number:        pfm\7385bdw.95
Companion Bill Number:          800
Date Bill Passed both Bodies:   19950601
Date of Last Amendment:         19950523
Governor's Action:              S
Date of Governor's Action:      19950607
Subject:                        Business development corporations,
                                new classes of stock

History



Body    Date      Action Description                       Com     Leg Involved
______  ________  _______________________________________  _______ ____________

------  19950607  Act No. A123
------  19950607  Signed by Governor
------  19950606  Ratified R184
Senate  19950601  Read third time, enrolled for
                  ratification
Senate  19950530  Read second time, notice of
                  general amendments
Senate  19950524  Introduced, read first time,
                  placed on Calendar without reference
House   19950524  Read third time, sent to Senate
House   19950523  Amended, read second time
House   19950518  Committee report: Favorable with         26 HLCI
                  amendment
House   19950412  Introduced, read first time,             26 HLCI
                  referred to Committee

View additional legislative information at the LPITS web site.


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A123, R184, H4015)

AN ACT TO AMEND SECTION 33-37-260, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AMENDMENTS TO CHARTERS FOR BUSINESS DEVELOPMENT CORPORATIONS, SO AS TO DELETE THE PROVISION PROHIBITING THE CREATION OF NEW CLASSES OF STOCK; TO AMEND SECTION 33-37-410, RELATING TO MEMBERS, STOCKHOLDERS, AND BONDHOLDERS OF THE CORPORATIONS, SO AS TO CLARIFY THE AUTHORIZED INVESTORS AND INVESTMENT LIMITS; TO AMEND SECTION 33-37-450, RELATING TO VOTING BY STOCKHOLDERS AND MEMBERS OF THE CORPORATION, SO AS TO REVISE THE PROVISIONS TO MAKE THEM CONSISTENT AND COMPATIBLE WITH HAVING NEW CLASSES OF STOCK; TO AMEND SECTION 33-37-460, AS AMENDED, RELATING TO LOANS TO THE CORPORATION, SO AS TO REVISE THE PROVISIONS FOR LOAN LIMITS AND INVESTMENT LIMITS; TO AMEND SECTION 33-37-630, RELATING TO THE ELECTION OF THE BOARD OF DIRECTORS OF CORPORATIONS, SO AS TO CLARIFY THE REQUIREMENTS FOR ELECTION; AND TO AMEND THE 1976 CODE BY ADDING SECTION 33-37-470 SO AS TO AUTHORIZE THE ISSUANCE OF NEW CLASSES OF STOCK AND ARTICLE 9 TO CHAPTER 37, TITLE 33 SO AS TO PROVIDE FOR APPLICATION OF THE BUSINESS CORPORATIONS ACT.

Be it enacted by the General Assembly of the State of South Carolina:

Prohibition on creating new classes of stock deleted

SECTION 1. Section 33-37-260 of the 1976 Code is amended to read:

"Section 33-37-260. The charter may be amended by the votes of the stockholders and the members of the corporation voting separately by classes. The amendments require approval by the affirmative vote of two thirds of the votes to which the stockholders are entitled and two thirds of the votes to which the members are entitled. No amendment of the charter which is inconsistent with the general purposes expressed in this chapter or which eliminates or curtails the right of the Secretary of State to examine the corporation or the obligation of the corporation to make reports as provided by law may be made without amendment of this chapter. No amendment of the charter which increases the obligation of a member to make loans to the corporation, makes a change in the principal amount, interest rate, or maturity date or in the security or credit position of an outstanding loan of a member to the corporation, affects a member's right to withdraw from membership as provided in Section 33-37-430, or affects a member's voting rights as provided in Sections 33-37-440 and 33-37-450 may be made without the consent of each member affected by the amendment."

Authorized investors and investment limits clarified

SECTION 2. Section 33-37-410 of the 1976 Code is amended to read:

"Section 33-37-410. In addition to other persons and notwithstanding any provision of general or special law or any provision in their respective charters, agreements of association, articles of organization, or trust indentures:

(1) All domestic corporations organized for the purpose of carrying on business within this State, including without implied limitation public utility companies and insurance and casualty companies, foreign corporations licensed to do business in the State, and all trusts, may acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of bonds, securities, or other evidences of indebtedness created by or the shares of the capital stock of the corporation and while owners of the stock may exercise all the rights, powers, and privileges of ownership, including the right to vote on it, all without the approval of a regulatory authority of the State.

(2) All financial institutions may become members of the corporation and make loans to the corporation as provided in this chapter.

(3) A financial institution which does not become a member of the corporation may not acquire any shares of the capital stock of the corporation.

(4) Each financial institution which becomes a member of the corporation may acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of bonds, securities, or other evidences of indebtedness created by or the shares of the capital stock of the corporation and while owners of the stock may exercise all the rights, powers, and privileges of ownership, including the right to vote on it, all without the approval of a regulatory authority of the State. The amount of the capital stock of the corporation which may be acquired by a member pursuant to the authority granted in this section may not exceed five percent of the capital and surplus of the member. The amount of capital stock of the corporation which a member may acquire pursuant to the authority granted in this section is in addition to the amount of capital stock in corporations which the member otherwise is authorized to acquire."

Voting provisions revised

SECTION 3. Section 33-37-450 of the 1976 Code is amended to read:

"Section 33-37-450. (A) As to all matters requiring action by the members and the stockholders of the corporation, the members and the holders of each class of stock, of which there are then shares authorized and outstanding for which votes are entitled to be cast, shall vote separately on the matters by classes and, except as otherwise provided in this chapter, these matters require the affirmative vote of a majority of the votes to which the members present or represented at the meeting are entitled and the affirmative vote of a majority of the votes entitled to be cast with respect to the shares of each class of stock of which there are holders present or represented at the meeting.

(B) Unless otherwise provided in the charter of the corporation, each stockholder has one vote, in person or by proxy, for each share of capital stock held by him, and each member shall have one vote, in person or by proxy. However, a member having a loan limit of more than one thousand dollars has one additional vote, in person or by proxy, for each additional one thousand dollars which the member is authorized to have outstanding on loans to the corporation at any one time as determined under Section 33-37-460(3)(b)."

Loan and investment limits revised

SECTION 4. Section 33-37-460 of the 1976 Code, as amended by Section 522, Act 181 of 1993, is further amended to read:

"Section 33-37-460. Each member of the corporation shall make loans to the corporation as and when called upon by it to do so on terms and conditions approved by the board of directors, subject to the following conditions:

(1) All loan limits must be established at the thousand dollar amount nearest to the amount computed in accordance with the provisions of this section.

(2) No loan to the corporation may be made if immediately after the loan the total amount of the obligations of the corporation exceeds ten times the amount then paid in on the outstanding capital stock of the corporation.

(3) The total amount outstanding on loans to the corporation made by a member at any one time, when added to the amount of the investment in capital stock of the corporation then held by the member, may not exceed:

(a) twenty percent of the total amount then outstanding on loans to the corporation by all members, including in the total amount outstanding amounts validly called for loan but not yet loaned. However, the conditions of this subitem do not apply to short-term loans to the corporation when the loan later is repaid:

(i) from a general loan call to the corporation to be prorated among all members of the corporation as provided in item (4); or

(ii) through the sale of participations in loans made by the corporation; or

(b) the following limits, to be determined initially as of the time the member becomes a member on the basis of the audited balance sheet of the member at the close of its fiscal year immediately preceding its application for membership, or for an insurance company, its last annual statement to the Director of the Department of Insurance or his designee and annually after that time based upon the audited balance sheet of the member at the close of its fiscal year immediately preceding the first day of the fiscal year of the corporation for which the limit is to be determined, or for an insurance company, the last annual statement to the Director of the Department of Insurance, or his designee, before the fiscal year of the corporation for which the limit is to be determined:

(i) five percent of the capital and surplus of commercial banks and trust companies;

(ii) one percent of the total outstanding loans made by a building and loan association. However, a business development corporation created pursuant to this chapter in its charter or by appropriate amendment to it may provide that the loan limit of a building and loan association member may be only one half of one percent of the total outstanding loans made by the building and loan association member;

(iii) one percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;

(iv) one percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;

(v) one tenth of one percent of the assets of fire insurance companies;

(vi) the limits approved by the board of directors of the corporation for other financial institutions.

(4) Subject to item (3)(a), each call made by the corporation must be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The adjusted loan limit of a member must be the amount of the member's loan limit, reduced by the balance of outstanding loans made by the member to the corporation.

(5) All loans to the corporation by members must be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation which are freely transferable at all times and which must bear interest at a rate of not less than one quarter of one percent in excess of the rate of interest determined by the board of directors to be the prime rate prevailing at the date of issuance on unsecured commercial loans.

(6) A member is not obligated to make loans to the corporation pursuant to calls made subsequent to the withdrawal of the member.

(7) If two or more members or a member and another entity which is not a member but which is eligible to become a member merge or consolidate, the organization merged or consolidated shall elect that its total amount on loan to the corporation must be equal to the combined loan limits of the members or the loan limit of the member merging or consolidating with the other entity, determined immediately before the merger or consolidation."

Requirements for election clarified

SECTION 5. Section 33-37-630 of the 1976 Code is amended to read:

"Section 33-37-630. The board of directors must be elected in the first instance by the incorporators and after that time at each annual meeting of the corporation or, if no annual meeting is held in any year, at the time fixed by the bylaws, at a special meeting held in lieu of the annual meeting. At each annual meeting, or at each special meeting held in lieu of the annual meeting, the members of the corporation shall elect two thirds of the board of directors, and the stockholders shall elect the remaining directors in the manner prescribed in the charter of the corporation. The directors must hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after their election and until their successors are elected and qualified unless sooner removed in accordance with the provisions of the bylaws. A vacancy in the office of a director elected by the members must be filled by the directors elected by the members, and a vacancy in the office of a director elected by the stockholders must be filled by the directors elected by the stockholders."

Issuance of new classes of stock authorized

SECTION 6. Article 5, Chapter 37, Title 33 of the 1976 Code is amended by adding:

"Section 33-37-470. The board of directors have the power to issue shares of capital stock of the corporation in the classes, series, and denominations set forth in the charter of the corporation, to the same extent and subject to the same restrictions as are otherwise applicable to business corporations organized under the laws of South Carolina under Chapters 1 through 20 of this title. However, the corporation may not issue shares of any series or class of stock with rights, restrictions, or other attributes which would impair or limit the rights of members under this chapter or impair or limit the rights given to stockholders generally under this chapter."

Application of general corporation law provided for

SECTION 7. Chapter 37, Title 33 of the 1976 Code is amended by adding:

"Article 9

Application of General Corporation Law

Section 33-37-910. Chapters 1 through 20 of this title apply to every corporation organized pursuant to this chapter, except as otherwise provided in Chapters 1 through 20 of this title or by this chapter. If there is a conflict between the provisions of Chapters 1 through 20 of this title and Chapter 37 with respect to a corporation organized under this chapter, this chapter controls."

Time effective

SECTION 7. This act takes effect July 1, 1995.

Approved the 7th day of June, 1995.