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If religious doctrine governing the affairs of a religious corporation is inconsistent with the provisions of this chapter on the same subject, the religious doctrine controls to the extent required by the Constitution of the United States or the Constitution of South Carolina, or both.
OFFICIAL COMMENT

As a result of history, policy, and constitutional principles, religious corporations are entitled to protections not available to business or other nonprofit corporations. Courts have been reluctant to interfere with the internal affairs of religious organizations. They will not decide between conflicting religious doctrine or determine the "true" faith. However, courts have often decided internal property disputes by applying neutral principles of contract or corporate law to organizational documents of religious organizations. See Mansfield, "The Religious Clauses of the First Amendment and the Philosophy of the Constitution," 72 Calif. L. Rev. 847 (1984); Ellman, "Driven from the Tribunal: Judicial Resolution of Internal Church Disputes," 69 Calif. L. Rev. 1878 (1981).

This reluctance is based in part on the First Amendment to the United States Constitution which provides: "Congress shall make no law respecting an establishment of religion, or prohibiting the exercise thereof . . . ." The establishment clause applies to states [Everson v. Board of Education, 330 U.S. 1 (1947)], as does the free exercise clause [Cantwell v. Connecticut, 310 U.S. 296 (1940]. The Model Act attempts to walk the thin line between the establishment clause and the free exercise clause. It allows religious corporations to be formed and gives them the same rights and privileges as other corporations. The Model Act avoids interfering with the free exercise of religion by negating or allowing religious corporations to negate provisions of the Model Act that might result in excessive entanglement in religious activities by the state. By limiting state intrusion the Model Act uses the least restrictive means to provide an orderly structure in which religious corporations can be formed and operate.

Section 1.80 is based on the recognition that some provisions of the Model Act may conflict with the United States Constitutions or state constitutions. The exact scope of constitutional imitations is less than clear and is subject to debate. Section 1.80 overcomes this difficulty by providing that to the extent religious doctrine applicable to a religious corporation sets forth provisions inconsistent with provisions of the Model Act, the religious doctrine law shall control to the extent required by the

While in one sense section 1.80 simply states the obvious, it is helpful to remind those dealing with the religious corporations that they must consider constitutional mandates. The approach of section 1.80 also allows a case-by-case determination of difficult questions and automatically conforms the Model Act to the opinions of the United States Supreme Court and the applicable state courts.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is entirely new. As noted in Section 33-31-140, there is no limiting definition as to what entities may be incorporated as religious corporations. The main distinction in regard to South Carolina law between a religious corporation and a public benefit corporation is that there is more public monitoring of religious corporations, particularly by the Attorney General. This is in recognition of the separation of church and state.

Section 33-31-201. Incorporators.

One or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation to the Secretary of State for filing.
OFFICIAL COMMENT

Section 2.01 allows one or more persons to incorporate a corporations by delivering to the secretary of state the articles of incorporation. The term "person" is broadly defined in section 1.40(25) to allow a wide variety of individuals or entities to serve as incorporators. Anyone serving as an incorporator must sign the original of the articles of incorporation. Sections 1.20(f), (g), and 2.02(c).

Section 1.20(i) requires an original and one exact or conformed copy of the articles to be delivered to the secretary of state. An "exact" copy is a photographic or similar reproduction of the executed original articles. A "conformed" copy is a copy of the original articles on which the existence of any signature of signatures is noted. The prior law required delivery of "articles of incorporation in duplicate" to the secretary of state. While this is no longer a requirement, a person submitting duplicate originals to the secretary of state would meet the requirement of having filed an original and a "conformed" copy.

An exact or conformed copy of the articles is required so that the incorporator(s) will have a record of the incorporation. See the Official Comment to Section 2.03.

This section is a significant modification from prior practice but in conformity with the South Carolina Business Corporation Act (Section 33-2-101). Note that a corporation may serve as the incorporator since the definition of "person" includes an entity (Section 33-31-140). If desired, the incorporators may verify the filing but this is not required. Note that Section 33-31-129 mandates both criminal penalties and civil liabilities for any wrongful statement in a filed document.

Section 33-31-202. Articles of incorporation.

(a) The articles of incorporation must set forth:

(1) a corporate name for the corporation that satisfies the requirements of Section 33-31-401;

(2) one of the following statements:

(i) This corporation is a public benefit corporation.

(ii) This corporation is a mutual benefit corporation.

(iii) This corporation is a religious corporation;

(3) the street address of the corporation's initial registered office with zip code and the name of its initial registered agent at that office;

(4) the name, address, and zip code of each incorporator;

(5) whether or not the corporation will have members;

(6) provisions not inconsistent with law regarding the distribution of assets on dissolution; and

(7) the address, including zip code, of the proposed principal office for the corporation which may be either within or outside South Carolina.

(b) Unless the articles provide otherwise, no director of the corporation is personally liable for monetary damages for breach of any duty to the corporation or members. However, this provision shall not eliminate or limit the liability of a director:

(1) for any breach of the director's duty of loyalty to the corporation or its members;

(2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

(3) for any transaction from which a director derived an improper personal benefit; or

(4) under Sections 33-31-831 through 33-31-833.

This provision shall not eliminate or limit the liability of a director for an act or omission occurring before the date when the provision becomes effec- tive.

(1) the purpose for which the corporation is organized which may be, either alone or in combination with other purposes, the transaction of any lawful activity;

(2) the names, addresses, and zip codes of the individuals who are to serve as the initial directors;

(3) provisions not inconsistent with law regarding:

(i) managing and regulating the affairs of the corporation;

(ii) defining, limiting, and regulating the powers of the corporation, its board of directors, and members, or any class of members; and

(iii) the characteristics, qualifications, rights, limitations, and obligations attaching to each or any class of members;

(4) any provision that under this chapter is required or permitted to be set forth in the bylaws.

(d) Each incorporator and director named in the articles must sign the articles.

(e) The articles of incorporation need not set forth any of the corporate powers enumerated in this chapter.
OFFICIAL COMMENT

1. Introduction

Section 2.02 allows a simple one- or two-page document to serve as a corporation's articles of incorporation. While there are numerous standard provisions that must be contained in the articles, there is no single standard form of articles.

Section 2.02 requires certain provisions to be in the articles of incorporation and allows the articles to contain other optional provisions. If no limitation is placed on the duration of the corporation and no optional provisions are contained in the articles, the corporation will have perpetual existence, the purposes set forth in section 3.01 and the broad powers enumerat- ed in section 3.02. However, as a result of sections 2.02(b)(3)(ii) and 3.02, a corporation may limit its duration and corporate powers.

To meet the requirements of Internal Revenue Code section 501 or equivalent state tax provisions, the articles of many nonprofit corporations must contain limitations on corporate activity and restrictions on the use and distribution of corporate assets. In addition, the articles of all nonprofit corporations must contain provisions dealing with the disposition of corporate assets on dissolution.

The articles of incorporation must contain the following information:

(a) A corporate name that meets the requirements of section 4.01.

(b) A statement that the corporation is a public benefit, a mutual benefit or a religious corporation. This election requires those forming a nonprofit corporation to choose between public benefit, mutual benefit and religious status at the time of incorporation. See the Introduction to the Model Act for comments on the significance of this distinction. This election will avoid confusion as to the status of nonprofit corporations under the Model Act. See Los Angeles County Pioneer Society v. Historical Society of Southern California, 40 Cal. 2d 852, 257 P.2d 1 (1953); Lynch v. Spilman, 67 Cal. 2d 251, 62 Cal. Rptr. 12, 431 P.2d 636 (1967). Assets held by public benefit and religious corporations may not be distributed to members, directors, officers or controlling persons in violation of section 13.01 and may only be distributed on dissolution as set forth in section 14.06. If a mutual benefit corporation holds assets in charitable trust, the same limitations apply to distribution of those assets. Other assets held by mutual benefit corporations may not be distributed to members, directors, officers or controlling persons until the corporation dissolves. See chapter 13 that governs distributions.

(c) The address of the corporation's initial registered office and the name of its initial registered agent.

(d) The name and address of each incorporator.

(e) Whether or not the corporation will have members. The term "members" has a limited meaning which is set forth in section 1.40(17). Many nonprofit corporations do not have members. They operate with a self-perpetuating board of directors, delegates, or some other system. Those corporations that will not have members must so indicate in their articles. Those corporations that will have members must indicate that there will be members. However, the bylaws and not the articles usually set forth the characteristics, qualifications, rights, limitations and obligations of the members. See initial Comment 3(c)(ii) regarding optional provisions setting forth rights and obligations of members.

(f) The disposition of assets on dissolution. A nonprofit corporation, unlike a business corporation, must provide for the distribution of its assets on dissolution. If a business corporation dissolves, its net worth will be distributed to its shareholders. Upon dissolution of a nonprofit corporation, its assets are not necessarily distributed to its members. In fact, the assets of public benefit and religious corporations and organizations that have section 501(c)(3) status generally cannot be distributed to members. See chapter 13 and section 14.06.

3. Optional Provisions

Section 2.02(b) allows the article to contain a number of optional provisions. In determining whether to insert an optional provision in the articles, a person forming a corporation should consider the advantages and disadvantages of making the provision subject to public scrutiny, the procedure necessary to amend articles, and the requirements of federal and state income and property tax laws.

Optional provisions include:

(a) A broad or a limited purpose clause. To obtain tax exempt status under federal and state law, many nonprofit corporations will elect to limit their corporate purpose. As the tax laws differ for various types of organizations and change from time to time, it is not feasible to mandate particular limita- tions. Those forming a corporation, however, should be careful not to limit the purposes or impose more limitations than required by the tax laws unless they have a particular reason to do so. For example, while it may be necessary to irrevocably dedicate assets of a section 501(c)(3) organization to charitable, educational, or certain other activities, it may not be necessary to irrevocably dedicate a corporation's assets to such purposes in order to obtain other exempt status. By irrevocably dedicating assets when such dedication is not required, the incorporators may inadvertently impress the assets of a corporation with unintended restrictions and obligations. While a narrow purpose clause may serve to identify the existence of the corporation, a narrow purpose clause may unduly restrict corporate activity. For example, if the articles limit the corporate purpose to operating a hospital, the corporation may not be able to only operate outpatient clinics. See Queen of Angels Hospital v. Younger, 66 Cal. App. 3d 359, 136 Cal. Rptr. 36 (1977).

(b) The names and addresses of the individuals who are to serve as initial directors. Section 2.02(e) requires all individuals named as initial directors to sign the articles to evidence their consent to serving as directors. This requirement prevents people from being named as initial directors without their consent. This problem is more acute in nonprofit corporations than in business corporations. In nonprofit corporations incorporators sometimes name respected or famous individuals as directors in the hope that they will serve as directors.

(c) Provisions not inconsistent with the law regarding management or regulation of the affairs of the corporation including.

(i) Defining, limiting, and regulating the powers of the corporation, its directors and members. It is not necessary to set forth any corporate powers enumerated in the Act. See section 3.02.

(ii) The characteristics, qualifications, rights, limitations, and obligations of the members. Typically, provisions relating to members' rights and obligations are set forth in the bylaws of a corporation and not in its articles. This is for two reasons. First, it allows membership provisions to be contained in a private or semi-private document and not in the articles that are filed with the secretary of state. Second, amendments to the article always require a vote of members which may be cumbersome and time consuming. Compare sections 10.01-10.08 with sections 10.20-10.22. Thus, more privacy and greater flexibility are obtained by putting membership provisions in bylaws.
(iii) Any provision that under the Act is required or permitted to be set forth in the bylaws. See the Official Comment to Section 2.06.
SOUTH CAROLINA REPORTERS' COMMENTS

1. Similarities to former statutes

Although this is a major revision, both the old law (found in prior Chapter 31, Title 33) and this new law require the name of the corporation to be on the articles. Whereas the old law required a specific purpose to be identified, the new law simply requires the corporation to identify whether it is a public benefit, mutual benefit, or religious corporation, and permits the articles to identify the purpose or purposes for which the corporation is organized which may be, either alone or in combination with other purposes, the transaction of any lawful activity. The old law and new law both permit the inclusion of certain "other provisions." The corporation's powers are not specified in the articles; however, in addition to irrevocably dedicating its assets as described in the Official Comments to Section 33-31-202 and as contained in the language in Section 33-31-1406(a)(6), if the organization intends to qualify for exemption within the meaning of Section 501(c)(3) of the Internal Revenue Code, its articles must limit its purposes to those specified in Section 501(c)(3) and must limit its powers to these within the scope of Section 501(c)(3). Since most corporations will not file tax returns and will not file either an initial or subsequent annual reports, different from the Model Act but in keeping

Some nonprofit corporations such as Rotary clubs, the Kiwanis, and others, will not have an actual permanent location. They will have a usual place of meeting and may maintain a mailbox or a member's address as their mailing address. It is anticipated that the Secretary of State will liberally construe the requirement in this section that the organization list its "street address." In situations where the organization does not actually own or lease property, it is assumed that the filing will be acceptable if it specifies the usual mailing address which the organization uses. The organization, if it desires, could also specify its usual date, time, and place of meeting - or merely its usual place of meeting.
2. Items removed

As noted in the preceding paragraph, the actual purpose of the nonprofit corporation does not have to be specified as was formerly true. (The existence of an additional catch-all "purpose" to engage in any business enterprise was deemed to be uncertain and unclear thus forming one of the reasons to deny a charter to the Ku Klux Klan, 1956-57 Op.S.C. Attorney General, 179 (April 8, 1957.) The old law required the articles to be filed by two or more officers or agents elected or appointed to supervise the corpora- tion whose residence addresses had to be identified. The new law simply provides for execution by at least one incorporator. There is no longer a requirement to specify the names and residences of all officers, mangers, trustees, directors, or other officers and agents. (The names and addresses of the directors may be listed on the articles, and if so listed, the directors must sign the articles.)
3. Items added

The name must meet the requirements of Section 33-31-401. The street address and name of the initial registered agent at that office must be identified. The articles must designate whether or not the corporation will have members, and provisions regarding the distribution of assets on dissolution. Various optional items may be included. Provisions not inconsistent with law can be included in regard to (a) managing and regulating the affairs of the corporation; (b) defining, limiting, and regulating the powers of the corpora- tion, its board of directors, and members (or any class of members); and (c) the characteristics, qualifications, rights, limitations and obligations attaching to each or any class of members. Any provision that under the Act is required or permitted to be set forth in the bylaws can be placed in the articles.
A director immunity provision is adopted as paragraph (b). Each corporation automatically includes this provision in its articles unless the

Section 33-31-834 also provides a very broad grant of immunity to directors of certain 501(c)(3) organizations and other entities. Section 33-55-210 provides certain immunities to true charitable organizations and possibly to their members. A discussion of these provisions is contained in the South Carolina Reporters' Comments to Section 33-31-204.

In adopting this Section 33-31-202(b), it was the legislative intent that the protections granted by the immunity provisions in these three sections are to be applied cumulatively. If any one of the sections contains an immunity provision which would protect a director (or member) against a claim, that section shall be applied even though the challenged behavior is not immunized under another section. For example, the directors of homeowner mutual benefit corporations are likely not protected by Section 33-31-834. However, if the challenged behavior of the homeowner director is immunized by the provisions of this Section 33-31-202(b), this section would in fact apply and protect the director of the homeowner mutual benefit corporation. Likewise, although grossly negligent conduct is not immunized by Section 33-31-834, it is pursuant to Section 33-31-202(b).
4. Tax exempt status

A public benefit or religious corporation will not be automatically exempt from federal or state income tax. If income tax exemption is desired, the articles should limit the purpose and powers of the corporation and irrevocably dedicate its assets to tax exempt purposes as required by tax laws, especially regulations adopted under Internal Revenue Code Section 501(c)(3). For example, the articles should contain language providing for the distribution of its assets upon dissolution in accordance with section 33-31-1406(6).
5. Provisions in other sections

Each nonprofit corporation is presumed to have perpetual existence. Section 33-31-302. The effective date of a filed document is controlled by Sections 33-31-123 and 33-31-203. Incorporators are described in Section 33-31-201. If the articles (or other controlling document, such as the bylaws) fail to provide how the assets will be distributed at dissolution, default provisions are provided in Section 33-31-1406(6) for public benefit

6. Optional provisions

If the members desire, for example, to transfer the authority to appoint officers from the board to themselves, the provisions of subsection (c)(3)(i) and section 33-31-801(c) grant them this power. The members could place a provision in the articles which simply states that the members, instead of the directors, have the exclusive power to appoint all of the corporation's officers. See also the comments to section 33-31-801.

Section 33-31-203. Incorporation.

(a) Unless a delayed effective date is specified, the corporate existence begins when the articles of incorporation are filed.

(b) The Secretary of State's filing of the articles of incorporation is conclusive proof that the incorporators satisfied all conditions precedent to incorporation except in a proceeding by the State to cancel or revoke the incorporation or involuntarily dissolve the corporation.
OFFICIAL COMMENT

1. Corporate Existence

Unless a delayed effective date is specified, a de jure corporation is formed when the secretary of state files the articles. Typically, the articles are stamped and dated as "filed" when they are delivered to the secretary of state even if internal procedures of the secretary of state require additional processing time. See section 1.25. Those forming a corporation may, however, request that the corporation's existence begin at a specified time following delivery of the articles to the secretary of state.

2. Proof of Incorporation

Pursuant to section 2.03(b), the secretary of state's filing of the articles is conclusive proof that all conditions precedent to incorporation have been met except in a proceeding brought by the state.
SOUTH CAROLINA REPORTERS' COMMENTS

Nonprofit corporations always have enjoyed a delayed effective date in that the "declaration" ("articles") could not be even filed until three newspaper announcements had run (former Section 33-31-20). The prior law, former Section 33-31-60, granted substantial discretion to the Secretary of State who formerly was to investigate the merits of the proposed nonprofit corporation. Together with Section 33-31-125, this new section makes formation of a nonprofit purely mechanical: If promoters comply with the form and mechan- ics of the statutory filing requirements, the Secretary of State "shall" file proffered articles, which become effective (so that the corporate existence begins) on the date of

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