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In the past, if the articles did not provide to whom the assets were to be distributed at dissolution, this might have been some indication that the corporation was not in fact eleemosynary, 1963-64 Op.S.C. Attorney General, 271 (#1759).

In Peden v. Furman University, 155 S.C. 1, 151 S.E. 907 (1930), the university was unable to obtain dismissal of a cause of action claiming that its baseball field was effectively a nuisance notwithstanding that it "might be an eleemosynary corporation.

This Act, like the former provisions of Chapter 31, Title 33, says nothing about whether the nonprofit corporation might be exempt from any South Carolina tax. See e.g., Textile Hall Corporation v. Hill, 215 S.C. 262, 54 S.E.2d 809 (1949). The court in this case found that although the corporation's charter, specially granted by the legislature, purported to exempt the entity from property tax, that the entity. although nonprofit, was not within the class of nonprofit corporations which were generally permitted by the Constitution to be exempt from tax. The court looked beyond the stated purpose in the charter to the actual operation of the textile hall. As noted in 1965-66 Op. S.C. Attorney General, 157 (#2064), a charitable, social, or fraternal corporation is not as such exempt from payment of any ad valorem property tax. Specific reference must be made to the taxing statutes for a determination as to whether any

Section 33-31-302. General powers.

Unless its articles of incorporation provide otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its affairs including, without limitation, power:

(1) to sue and be sued, complain, and defend in its corporate name;

(2) to have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing or in any other manner reproducing it;

(3) to make and amend bylaws not inconsistent with its articles of incorporation or with the laws of this State for regulating and managing the affairs of the corporation;

(4) to purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with, real or personal property or any legal or equitable interest in property, wherever located;

(5) to sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;

(6) to purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and deal in and with, shares or other interest in or obligations of any entity;

(7) to make contracts and guaranties, incur liabilities, borrow money, issues notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;

(8) to lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment, except as limited by Section 33-31-832;

(9) to be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;

(10) to conduct its activities, locate offices, and exercise the powers granted by this chapter within or without this State;

(11) to elect or appoint directors, officers, employees, and agents of the corporation, define their duties, and fix their compensation;

(12) to pay pensions and establish pension plans, pension trusts, and other benefit and incentive plans for any or all of its current or former directors, officers, employees, and agents;

(13) to make donations not inconsistent with law for the public welfare or for charitable, religious, scientific, or educational purposes and for other purposes that further the corporate interest;

(15) to impose dues, assessments, and admission and transfer fees upon its members;

(16) to establish conditions for admission of members, admit members, and issue memberships;

(17) to carry on a business;

(18) to do all things necessary or convenient, not inconsistent with law, to further the activities and affairs of the corporation.
OFFICIAL COMMENT

Section 3.02 is an historic anomaly. In the nineteenth and early twentieth centuries corporate charters were granted for limited purposes. As corporation laws began to develop, they listed ad nauseam specific powers to overcome the problem of limited purpose corporations.

There was considerable sentiment on the Committee to simply have section 3.02 provide that corporations have the powers of an individual to do all things necessary or convenient to carry out their activities. However, in light of history, it was feared that a court might improperly conclude that a corporation lacked some power because it was not specifically set forth in the Model Act. In addition, there was some concern that attorneys might revert to the ill-advised practice of enumerating powers in articles of incorporation. Consequently, section 3.02 provides a broad grant of powers and sets forth a nonexclusive list of specific powers.

As a result of section 3.02, it is not necessary for a corporation to provide in its articles or bylaws that it has any particular powers. If nothing is said, a corporation automatically has the powers set forth in section 3.02.

In some instances, it may be desirable or necessary to limit corporate powers. Section 3.02 allows the articles of incorporation to limit the powers of a corporation. Limitations may be imposed to obtain federal or state tax status, because a grantor wishes to limit the activities of a corporation, or for some other reason. Persons forming or operating a nonprofit corporation may want to limit its powers.

A distinction should be drawn between the power of a corporation to do all things necessary or convenient to carry out its activities and the question of whether corporate acts are reasonable or otherwise prohibited. Section 1.50, for example, prohibits private foundations from taking certain actions, even though they have the power to do so. Similarly,

The following changes from and clarifications of the prior law should be noted:

(1) Nonprofit corporations can provide pension and other benefits to current and former directors, officers, employees and agents. Section 3.02(11) and (12). Under appropriate circumstances the board of directors may establish or change benefits for former employees.

(2) Nonprofit corporations have the power to make donations for public welfare or for charitable, scientific, or educational purposes and for other purposes, not inconsistent with law, to further the corporate interests. Section 3.02(13). This specific grant of power is not a limitation on the general power of nonprofit corporations to make the same donations individuals can make.

(3) Nonprofit corporations may impose dues, assessments, admission and transfer fees upon their members. Section 3.02(14). The fact that articles or bylaws authorize dues, assessments or fees does not necessarily impose liability on members. See sections 6.13-6.15.

(4) Nonprofit corporations have the power to engage in business. Nonprofit organizations operate hospitals, department stores, consulting firms, book stores, automobile associations, clearing houses and other activities that could be characterized as business. These activities are within a nonprofit corpora- tions' powers as a result of section 3.02(16).

The fact that a nonprofit corporation has the power to operate a business does not mean that the corporation is acting properly in running the business. The business must be consistent with or in aid of the public or charitable purposes of a public benefit corporation, benefit the members of a mutual benefit corporation or be consistent with or in aid of the religious purpose of a religious corporation. A corporation that does not operate a business for those purposes can be challenged in a quo warranto or similar proceeding. See Olsen v. National Memorial Gardens, Inc., 115 N.W.2d 312, 366 Mich. 492 (1962); People v. Society of Good Neighbors, 42 N.W.2d 761, 327 Mich. 620 (1950); People v. White Circle League of America, 97 N.E.2d 811, 408 Ill. 564 (1951). Also see State v. National Ass'n of Angling & Casting Clubs, 51 N.E.2d 662 (1943), where profit from business activities was used for the objects of the organization and the court found no wrongful activity.

A major problem with the prior nonprofit statute (former Chapter 31, Title 33) was that it did not grant nonprofit entities the necessary powers to operate efficiently. For example, some lawyers believed that the former statute prevented churches and other nonprofit corporations from investing their excess funds. (Although 1954-55 Op.S.C. Attorney General, 281, stated "the University [of South Carolina] or any other charitable corporation which is given funds for the use of the institution, without any restrictions as to the manner in which the same may be used, that the administrative officials may exercise their own judgment as to the use of such funds, including the investment of same.") In one case, question was raised whether the Porter Academy in Charleston had the power to own and convey real property, the court finding that it did, Pierson v. Porter Academy, 217 S.C. 168, 60 S.E. 2d. 82 (1950). (The plaintiff's claim that the state legislature's act in chartering the academy was an unconstitutional special legislation was likewise denied on the authority of Epworth Orphanage v. Wilson, Country Treasurer, 185 S.C. 243, 193 S.E. 644 (1937), "unless there is some affirmative showing that the Constitution was not complied with in the enactment of a special legislative act, the charter of the corporation is good.") Attorney General opinions have indicated that a nonprofit corporation may dispose of its assets as it sees fit in the absence of the existence of a charitable trust relationship, 1963-64 Op. S.C. Attorney General, 271 (#1759), has the right to own, buy and sell real estate in accordance with its bylaws, and if it has none, should likely obtain the members permission before selling any property, 1961-62 Op. S.C. Attorney General, 91 (#1324), and may accept bequests (e.g., for the promotion of the Boy Scout movement), 1958-59, Op. S.C. Attorney General, 107 (#612).

The nonprofit corporation is a jural "person" with all of the powers of a person. As the Official Comment makes clear, these powers must be exercised in a way consistent with the statute. The 1994 South Carolina Nonprofit Corporation Act gives a nonprofit corporation the "power" to carry on a business. The headnotes to an earlier Attorney General's opinion indicate that this power would cause the entity not to be a nonprofit corporation, 1956-57 Op.S.C. Attorney General, 179 (April 8,

In Lovering v. Seabrook Island Property Owners Assoc., 289 S.C. 77, 344 S.E. 2d 862 (Ct. Appls. 1986), aff'd. & mod. 291 S.C. 201, 352 S.E.2d 707 (1987), the board of a nonprofit homeowners association levied a special assessment to repair bridges within the subdivision and renourish the beach. The Court of Appeals held that the board did not have the power to do this and the act was therefore ultra vires.

Although the corporation's bylaws very clearly gave it the power to assess an annual maintenance charge to be levied on the basis of each lot's tax assessment, representations had been made in the Property Report (at time of purchase) that no special assessments would be made.
A corporation may exercise only those powers which are granted to it by law, by its charter or articles of incorporation, and any by-laws made pursuant thereto. . . Acts beyond the scope of a corporation's powers as defined by law or its charter are ultra vires . . . In determining a corporation's powers, its charter is to be construed strictly; any ambiguity in the terms of a corporate charter must operate against the corporation. . . . The specification of certain powers operates as a limitation on such objects as are embodied therein and is an implied prohibition of the exercise of other and distinct powers. . .
The Association contends it may impose special assessments for any corporate purpose pursuant to the general statement of purposes in its by-laws. The Association specifically directs our attention to a provision in the by-laws stating that the purpose of the Association is, among other things, "to engage in such other activities as may be to the mutual benefit of the owners of property on Seabrook Island." This provision, it contends authorizes it to impose special assessments for corporate purposes.
The general statement of corporate purposes relied on is not sufficient, standing alone, to authorize the levying of special assessments on property owners. . .
As a matter of general law, a nonprofit corporation has the power to enforce the collection of dues and charges in accordance with the provision of its by-laws. See Section 33-31-100, Code of Laws of South Carolina, 1976. In this case, however, nether the protective covenants nor the bylaws, give the Association power to levy special assessments.

The Court of Appeals also found that the board's action was not a proper amendment of the annual maintenance charge and thus invalid as an annual maintenance charge.

The Supreme Court affirmed as follows:
It is undisputed that the Association had no express power to impose the assessment at issue. The Association and the Company argue, however, that the power to levy this special assessment was an implied or incidental power of the Association's authority under its By-laws to maintain and preserve the amenities and values of the development.
Implied or incidental powers are those which are reasonably necessary to the execution of the corporation's express powers, not those which are merely convenient or useful . . .
Assuming, without deciding, that the Association had the responsibility of maintaining the streets and the beach, the By-laws provided the mechanism of an annual maintenance charge to finance the necessary repairs. Furthermore, the Association could have financed the repairs by use of its statutory authority to borrow funds under S. C. Code Ann. Section 33-31-100(2)(1976), a course of action the Association apparently considered and rejected. Since the power to levy a special assessment was not necessary for the Association to carry out its express powers, even if more convenient than the available fund raising methods, it could not be an implied or incidental power.

If the Association has the "power" (using the Supreme Court's term) and thus apparently the "right" to borrow the funds to repair the roads and beaches, who will pay this loan back? The assumption has to be that it will be the Association members. Therefore, other than the wrongful manner of apportioning the cost in the proposed assessment, how is the current assessment any different or less authorized than the borrowing?

It is also troubling that the Court of Appeals states that the corporate "powers" should be narrowly construed. This certainly is not the thrust of the Model Business Corporation or Nonprofit Corporation Acts, and

The court states that in determining the corporation's powers its charter is to be strictly construed. This is confusing. First of all, the corporation's powers are set forth in the statute and not in the charter. Second whether the "use" or "exercise" of a power to accomplish a particular objective should be "narrowly construed" is a different question. The court does not seem to make the distinction between whether a corporation has the "power" to do something generally, as contrasted with whether it has the right to exercise that power for a specific objective - whether the use of the power has been properly authorized. A simple example may help. No one would dispute the fact that a nonprofit corporation has the power to borrow money. However, if no one in the corporation properly approves of a particular loan, the corporation simply cannot borrow the money (even though the corporation has the "power" to borrow money).
2. Modification of former powers

Besides adding to the existing powers, some of the former powers have been modified. The former statute (Section 33-31-100(3)) granted the corporation the power to "expel or suspend" members. The new law states that the corporation shall have the power to establish conditions for admission of members. A separate section, Section 33-31-621, then specifies how members may be terminated, expelled, or suspended. The former statute stated in the list of powers that the corporation could adopt bylaws. Now this "power" is listed in a separate code section, Section 33-31-206.
3. New powers

Paragraph (14) of this section is not a Model Act provision, but will add certainty to the statute. This section specifically authorizes corporations to accept gifts, even if restricted, so long as the restrictions are not contrary to the Act or the purposes of the corporation. Likely, these powers are inherent in any nonprofit corporation, but in order to dispel any uncertainty, the language was added.

4. Interpretation of certain powers and comparison with the South Carolina Business Corporation Act

a. Broad interpretation. It is important to note that the final power, Section 33-31-302(18), gives the corporation the power to do all things necessary or convenient, not inconsistent with law, to further the activities and affairs of the corporation. The purpose of item (18) is to ensure that all of the powers granted in this section are broadly interpreted and that there be no limitation imposed on the powers of any nonprofit corporation. As noted above, this specifically modifies the holdings of Lovering v. Seabrook Island Property Owners Assoc., 289 S.C. 77, 344 S.E. 2d 862 (Ct. Appls. 1986), aff'd. & mod. 291 S.C. 201, 352 S.E.2d 707 (1987).

b. Out-of-state operations. Although not specifically stated, all South Carolina nonprofit corporations, pursuant to the broad language of Section 33-31-302, have the inherent right to operate in other states.

c. Convertible securities. Nonprofit corporations may, if consistent with the type of corporation, their purposes, and this statute, issue convertible securities. Item (16) grants the corporation power to issue "convertible" memberships or memberships having specific or unique terms.

d. Profit sharing plans. Nonprofit corporations may enter into profit sharing plans. "Profit sharing plans" are encompassed within the meaning of the term "benefit and incentive plans" as used in item (12). (However, certain types of nonprofit corporations may because of tax statutes or regulations be prohibited from establishing profit sharing plans.)

Section 33-31-303. Emergency powers.

(a) In anticipation of or during an emergency defined in subsection (d), the board of directors of a corporation may:

(1) modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and

(2) relocate the principal office, designate alternative principal offices or regional offices, or authorize the officer to do so.

(b) During an emergency defined in subsection (d), unless emergency bylaws provide otherwise:

(1) notice of a meeting of the board of directors need be given only to those directors it is practicable to reach and may be given in any practicable manner, including by publication and radio; and

(2) one or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.

(1) binds the corporation; and

(2) may not be used to impose liability on a corporate director, officer, employee, or agent.

(d) An emergency exists for purposes of this section if a quorum of the corporation's directors cannot readily be assembled because of some catastrophic event.

(e) Corporate action taken in good faith under this section to further the affairs of the corporation during an emergency binds the corporation. A corporate director, officer, employee, or agent is not liable for deviation from normal procedures if the conduct was authorized by emergency powers provided in this chapter.
OFFICIAL COMMENT

Section 3.03 provides that a corporation has specified powers in the event of an emergency even if emergency bylaws have not been adopted pursuant to section 2.07. The section allows corporations that have not adopted emergency bylaws to continue to operate until the emergency is passed.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is essentially identical to the previously applicable section, Section 33-3-103 of the South Carolina Business Corporation Act. Subsection (e) is not found in the Model Act and also is not part of the South Carolina Business Corporation Act. Subsection (e) provides that the officer, director, agent, or employee will not be liable for deviation form normal procedures if the conduct was authorized by emergency powers provided in the chapter. However, nothing in this provision, and specifically subsection (e) in any manner lessens the fiduciary duties of the directors during the emergency.

Section 33-31-304. Ultra vires.

(a) Except as provided in subsection (b), the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act.

(b) A corporation's power to act may be challenged in a proceeding against the corporation to enjoin an act where a third party has not acquired rights. The proceeding may be brought by the Attorney General, a director, or by a member or members in a derivative proceeding.

(c) A corporation's power to act may be challenged in a proceeding against an incumbent or former director, officer, employee, or agent of the corporation. The proceeding may be brought by a director, the corporation, directly, derivatively, or through a receiver, a trustee, or

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