| Printed Page 4260, Apr. 12 | Printed Page 4280, Apr. 12 |

(d) A record date fixed under this section may not be more than seventy days before the meeting or action requiring a determination of members occurs.

(e) A determination of members entitled to notice of or to vote at a membership meeting is effective for any adjournment of the meeting unless the board fixes a new date for determining the right to notice or the right to vote, which it must do if the meeting is adjourned to a date more than one hundred twenty days after the record date for determining members entitled to notice of the original meeting.

(f) If a court orders a meeting adjourned to a date more than one hundred twenty days after the date fixed for the original meeting, it may provide that the original record date for notice or voting continues in effect or it may fix a new record date for notice or voting.
OFFICIAL COMMENT
The concept of a record date is foreign to many nonprofit corporations. Nonprofit corporations often allow people to vote who become members on the day of a meeting. Some corporations use the right to vote as an incentive to join. These corporations have a cutoff day in advance of the meeting to determine who will receive notice of the meeting, but allow members who subsequently join to vote. Other nonprofit corporations, typically large or sophisticated organizations, adopt the record date concept used by business corporations. These corporations use the same record date to determine those entitled to notice and vote at a meeting. To accommodate these diverse practices the Model Act separates the concept of record date for notice from record date for the right to vote.

If the bylaws do not fix or provide the manner of fixing a record date for notice of a meeting, the board may do so. If no provision is contained in the bylaws and the board does not act, "members at the close of business on the business day preceding the day on which notice is given . . . are entitled to notice of the meeting." Section 7.07(a). If a meeting is held without notice and notice is waived, the day for determining who is entitled to waive notice is "the close of business on the business day preceding the day on which the meeting is held." Section 7.07(a).

If the bylaws do not fix or provide a manner for fixing a record date for voting at a meeting, the board may do so. If no provision is contained in the bylaws and the directors do not act, "members on the date of the meeting who are otherwise eligible to vote are entitled to vote at the meeting." Section 7.07(b).

These results comport with the way most nonprofit organizations operate. Corporations that operate in a different manner may adopt a bylaw or a corporate resolution setting forth a different record date.

A record date for determining what members are entitled to notice or vote at a meeting of members may be effective for an adjourned meeting provided the adjourned meeting is no more than 70 days after the record date for determining members entitled to notice of the original meeting. The board may always fix a new date for determining members entitled to notice or vote at an adjourned meeting provided it does so in good faith in a manner consistent with its obligations under section 8.30.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is substantially the same as Section 33-7-107 of the Business Corporation Act, except that (i) it deals with notice, voting, and other rights in three separate subsections; and (ii) it provides for membership action in default of director action.

The one hundred twenty-day time period of subsection (e), which measures the length of adjournment after which a new record date must be set, is a variation from the Model Act. The variation was made so that the time period would match that of Section 33-7-107 of the South Carolina Business Corporation Act.

Section 33-31-708. Action by written ballot.

(a) Unless prohibited or limited by the articles or bylaws, any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter.

(b) A written ballot shall:
(1) set forth each proposed action; and

(2) provide an opportunity to vote for or against each proposed action.

(c) Approval by written ballot pursuant to this section is valid only when the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required

(d) All solicitations for votes by written ballot shall:

(1) indicate the number of responses needed to meet the quorum requirements;

(2) state the percentage of approvals necessary to approve each matter other than election of directors; and

(3) specify the time by which a ballot must be received by the corporation in order to be counted.

(e) Except as otherwise provided in the articles or bylaws, a written ballot may not be revoked.
OFFICIAL COMMENT

Section 7.08 authorizes election of directors and approval of actions by written ballot. The ballots must be distributed to every member, provide specified information and allow a reasonable time for their return.

Most nonprofit corporations do not have sophisticated means of counting ballots. To ease the problem of counting ballots subsection (e) provides that a written ballot cannot be revoked unless revocation is authorized by the articles or bylaws.

Section 7.08 does not prohibit cumulative voting when directors are being elected by written ballot. However, the board of a corporation should think twice before allowing cumulative voting by written ballot. If election is by written ballot, contesting factions cannot sensibly decide how to allocate their votes to maximize the number of directors they can elect.

Action by written ballot may not serve as a substitute for an annual or special meeting of members.
SOUTH CAROLINA REPORTERS' COMMENTS

This section had no counterpart in prior statutory law. Significantly, ballots submitted pursuant to this section are not revocable, unlike proxies under Section 33-31-724.

"Deliver", as used in subsection (a), is defined in Section 33-31-140(8) to include "mail". The affidavit of an appropriate agent of the corporation that delivery has been made should shift the burden of proof to the party alleging failure of delivery.

Section 33-31-720. Members' list for voting.

(a) After fixing a record date for a notice of a meeting, a corporation shall prepare an alphabetical list of the names of all its members who are entitled to notice of the meeting and shall list the members by

(b) The list of members must be available for inspection by any member for the purpose of communication with other members concerning the meeting, beginning the day after notice is given of the meeting for which the list was prepared and continuing through the meeting, at the corporation's principal office or at a reasonable place identified in the meeting notice in the city where the meeting will be held. A member, a member's agent, or member's attorney is entitled on written demand to inspect and, subject to the limitations of Sections 33-31-1602(c) and 33-31-1605, to copy the list, at a reasonable time and at the member's expense, during the period it is available for inspection.

(c) The corporation shall make the list of members available at the meeting, and any member, a member's agent, or member's attorney is entitled to inspect the list at any time during the meeting or any adjournment.

(d) If the corporation refuses to allow a member, a member's agent, or member's attorney to inspect the list of members before or at the meeting, or copy the list as permitted by subsection (b), the court of common pleas of the county where a corporation's principal office in this State or, if none in this state, its registered office, is located, on application of the member, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete and may order the corporation to pay the member's costs, including reasonable counsel fees, incurred to obtain the order.

(e) Unless a written demand to inspect and copy a membership list has been made under subsection (b) before the membership meeting and a corporation improperly refuses to comply with the demand, refusal or failure to comply with this section does not affect the validity of action taken at the meeting.

(f) The articles or bylaws of a religious corporation may limit or abolish the rights of a member under this section.

(g) A member may inspect and copy the membership list only if (i) his demand is made in good faith and for a proper purpose; (ii) he describes with reasonable particularity his purpose; and (iii) the list is directly connected with his purpose.

1. Rights Provided to Members

A corporation is required to make its membership list available to any member for inspection or copying two days after notice of the meeting is given. The list must include the name and address and number of votes each member is entitled to cast at the meeting and must be updated to and including the date of the meeting. The need to update the list would only occur if members entitled to vote at the meeting join the corporation after the notice of the meeting is given. See section 7.07.

Prior to the meeting the list must be available at the corporation's "principal office" or "at a reasonable place identified in the meeting notice in the city where the meeting is to be held." In addition the list must be available at the meeting of members. Prior to and during the meeting of members the list may be copied at the member's expense by the member or the member's agent or attorney.

The right to inspect a copy of the list pursuant to section 7.20 is separate and independent of the inspection rights contained in Chapter 16. However, the limitations on inspection and copying rights of section 16.02(c) and 16.05 are applicable to inspection and copying under section 7.20.

If a record date notice a meeting is less than two days prior to the meeting because the meeting will be held pursuant to written waivers of notice, the list need only be available for inspection and copying at the meeting.

2. Enforcement of Rights

A court may summarily order inspection and copying of the list at the corporation's expense. In addition it may postpone the meeting for such period of time as it deems reasonable if the list has been wrongfully withheld and may order the corporation to pay the reasonable costs including counsel fees incurred to obtain the orders it makes. The court is not required to make any order, but has broad discretion to do what is appropriate and necessary under the circumstances taking into consideration the good faith of the parties, the reasons the corporation refused to provide the list, and other relevant facts.

3. Effect of Refusal to Comply with Section

With one exception the validity of any action taken at a meeting is not affected by the refusal or failure of the corporation to prepare, identify the location, or make available the list of members. In most instances members will not even ask to look at the membership list. In such cases the failure to follow the requirements of section 7.20 are of no consequence. Where a corporation wrongfully refuses a member's request

4. Religious Corporations

The rights of inspection set forth in section 7.20 may be limited or abolished in a religious corporation's articles or bylaws. If they are not limited or abolished, members of religious corporations have the rights set forth in section 7.20.
SOUTH CAROLINA REPORTERS' COMMENTS

This section differs from South Carolina Business Corporation Act Section 33-7-200 chiefly in details pertinent to the differences between nonprofit and business corporations. This section has been varied from the Model Act in the following ways:

1. Subsection (a) has been modified to require that the members be listed by classification of membership, if any. This is analogous to the requirement of Section 33-7-200(a) of the South Carolina Business Corporation Act that the shareholders' list be arranged by voting group.

2. Subsection (b) has been altered to require that the list be available on the day notice is given, as is provided in Section 33-7-200 (b) of the South Carolina Business Corporation Act. The Model Act suggested that the list be required to be available two days after the date notice is sent.

3. Subsection (d) has been altered to delete a provision permitting courts to require the payment of a member's costs, when the member was refused inspection under this section. This alteration makes subsection (d) analogous to Section 33-7-200(d) of the South Carolina Business Corporation Act.

4. Subsection (g) has been added to make a member's right to inspect and copy the membership list coextensive with a shareholder's right to inspect and copy the record of shareholders under Section 33-16-102 of the South Carolina Business Corporation Act.

Section 33-31-721. Voting entitlement generally.

(a) Unless the articles or bylaws provide otherwise, each member is entitled to one vote on each matter voted on by the members.

(b) Unless the articles or bylaws provide otherwise, if a membership stands of record in the names of two or more persons, their acts with respect to voting have the following effect:

(1) if only one votes, the act binds all; and

(2) if more than one votes, the vote must be divided on a pro rata basis.

Section 7.21 sets forth the basic rule that each member is entitled to one vote on each matter voted on by the members unless the articles or bylaws provide otherwise. Also see section 6.10. Corporations that wish to provide different voting rights may do so in their articles or bylaws. Different voting rights can be based upon the amount of dues paid or contributions made, the number of hours devoted to the corporation's activities, the net worth, sales volume, or number of outlets of a corporate member or innumerable other factors considered significant by the organization. These distinctions will be upheld by the courts unless they violate some federal or state law or are adopted in violation of some provision of the Model Act.

Subsection (b) deals with single memberships held by two or more persons. In the absence of a contrary bylaw provision, if only one person votes, that vote binds, the other holds. If more than one person votes, the vote is split pro rate based on the number of people voting. This rule comports with normal expectations, at least where one membership is held by a family and each member of the family is listed as holding part of the membership. In a mutual benefit organization where a membership is valuable, this rule may not make sense and some alternate approach should be set forth in the bylaws.
SOUTH CAROLINA REPORTERS' COMMENTS

This section varies from prior statutory law only in providing a default method of counting votes of dual memberships.

Section 33-31-722. Quorum requirements.

(a) Unless this chapter, the articles, or bylaws provide for a higher or lower quorum, ten percent of the votes entitled to be cast on a matter must be represented at a meeting of members to constitute a quorum on that matter.

(b) A bylaw amendment to change the quorum for a member action may be approved by the members and, if required, be approved as provided in Section 33-31-1030.

(c) An amendment to the articles of incorporation or bylaws that adds, changes, or deletes a greater quorum must be adopted under the quorum then in effect or proposed to be adopted, whichever is greater.
OFFICIAL COMMENT

Many nonprofit corporations have a low member turnout and need a low quorum to hold annual, regular or special meetings. In recognition of this need the section does not set a lower limit on a quorum requirement. For example, the bylaws may provide that the quorum is composed of those attending the meting or those voting upon a matter.

With the low quorum requirement authorized by section 7.22 a few members may plan to take over an annual or regular meeting and vote upon matters that were not noticed. To protect against this possibility section 7.22(d) prohibits members from voting upon a matter that was not noticed unless one third or more of the voting power is represented. When, however, a matter is noticed, a quorum of one member can act upon it. If the matter is not noticed, at least one third of the voting power must be present to take action. At special meetings members may only vote on matters that are noticed. See section 7.02(e).

Section 7.22(b) allows the members or the board to decrease the quorum. Decreasing the quorum should not be detrimental to the members as member action still requires at least approval by a majority of a quorum. The notice requirements of section 7.05 and voting requirements of section 7.23(a) provide additional protection. The bylaws may provide complete protection, and rigidity, by prohibiting the board from decreasing the quorum.

A bylaws amendment to increase the quorum may make it difficult for members to act. Consequently section 7.22(c) requires any such amendment to be approved by the members.

For those corporations whose articles or bylaws do not set a quorum, subsection (a) provides that the quorum shall be ten percent of the votes entitled to be cast on the matter. See section 1.40(35) for a definition of "voting power."

Quorum requirements may be changed by complying with the provisions of sections 10.01 through 10.05 when amending articles and sections 7.23 and 10.20 through 10.23 when amending bylaws. Section 10.30 may require the consent of a third person when the articles or bylaws are amended.
SOUTH CAROLINA REPORTERS' COMMENTS

Under prior law, the South Carolina Business Corporation Act provisions relating to quorums, Sections 33-7-250 and 33-7-270, governed nonprofit corporations. Those sections provided that a majority of votes entitled to be cast constituted a quorum unless the articles of incorporation provided differently. Section 33-31-722 sets the default quorum at ten percent, and permits this to be varied in the articles of incorporation or bylaws.

The Model Act version of this section permitted the board to amend the bylaws to decrease a quorum requirement for member action. That provision has been altered so that amendments to decrease and increase

Subsection (c) has been added to the Model Act version of this section. It is similar to Section 33-7-270(b) of the South Carolina Business Corporation Act. See also Section 33-31-723(c).

The Model Act version of this section provides that unless at least one-third of the voting power is present at an annual or regular meeting, no action can be taken which is not described in the meeting notice. That provision has been deleted. Provisions of this sort can, of course, be included in a corporation's articles or bylaws.

Sections 33-31-1002, et seq. and 33-31-1021, et seq. address amendment of the articles and the bylaws, respectively. Attention is drawn to the notice and other requirements of those sections.

Section 33-31-723. Voting requirements.

(a) Unless this chapter, the articles, or the bylaws require a greater vote or voting by class, if a quorum is present, the affirmative vote of the votes represented and voting, which affirmative votes also constitute a majority of the required quorum, is the act of the members.

(b) A bylaw amendment to increase or decrease the vote required for a member action must be approved by the members and, if required, be approved as required in Section 33-31-1030.

(c) An amendment of the articles of incorporation or bylaws adding, changing, or deleting a voting requirement must be adopted by the same vote and classes of members required to take action under the voting requirements then in effect or proposed to be adopted, whichever is greater.
OFFICIAL COMMENT

See section 1.40(1) for the definition of "approved by the members." Also see the Official Comment to section 1.40 for a discussion of the meaning of "approved by the members." The question of the member vote required to approve an action should be within the control of the members. Consequently section 7.23(c) requires member approval to amend the bylaws to increase or decrease a required vote. Of course, the members cannot reduce the vote required for member action below a majority of the required quorum. Section 1.40(1). Nor may they change a vote mandated by the Model Act.
SOUTH CAROLINA REPORTERS' COMMENTS

Under prior statutory law, Section 33-7-250 of the South Carolina Business Corporation Act governed voting requirements. That section provides that the membership has acted where approving votes outnumber

Under prior statutory law, Section 33-7-270(b) of the South Carolina Business Corporation Act governed changes in voting requirements, providing that changes in voting requirements must be approved by the greater of the existing or the proposed new requirement. This provision has been added to Section 33-31-723 as subsection (c). This is a variation from the Model Act. See also Section 33-31-722(c).

Prior statutory law required variations in voting requirements to appear in the articles of incorporation. Section 33-31-723 contemplates that such variations may appear in the bylaws.

Section 33-31-724. Proxies.

(a) Unless the articles or bylaws prohibit or limit proxy voting, a member may appoint a proxy to vote or otherwise act for the member by signing an appointment form either personally or by an attorney-in-fact.

(b) An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for eleven months unless a different period is expressly provided in the appointment form. However, no proxy is valid for more than three years from its date of execution.

(c) An appointment of a proxy is revocable by the member.

(d) The death or incapacity of the member appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.

(e) Appointment of a proxy is revoked by the person appointing the proxy:

(1) attending any meeting and voting in person; or

(2) signing and delivering to the secretary or other officer or agent authorized to tabulate proxy votes either a writing stating that the appointment of the proxy is revoked or a subsequent appointment form.

(f) Subject to Section 33-31-727 and any express limitation on the proxy's authority appearing on the face of the appointment form, a corporation is entitled to accept the proxy's vote or other action as that of the member making the appointment.
OFFICIAL COMMENT

Section 7.24 authorizes members to vote by proxy, but allows the articles or bylaws to prohibit or limit proxy voting.

| Printed Page 4260, Apr. 12 | Printed Page 4280, Apr. 12 |