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A member or the member's attorney-in-fact may appoint a proxy by signing an appointment form. No particular type of form is required. A proxy may vote or otherwise act for the member on all matters unless the appointment form contains an express limitation on the proxy's authority. Members wishing to limit the power of a proxy should carefully draft the authorization form to limit the proxy's power.

The corporation must treat the act of the proxy as the act of the member unless the appointment form limits the power of the proxy or directs the proxy to act in a specified way. Any such limitation or direction must be observed by the corporation.

The appointment of a proxy may be revoked at any time. See subsection (e) for means of revocation.

To provide certainty, subsection (d) modifies common law principles and allows a corporation to accept a proxy's authority until it receives notice of the death or incapacity of the member appointing the proxy. A proxy's vote or other action is final and binding, but the proxy may be liable to the appointment member for damage resulting from the proxy's failure to act in accordance with the appointment.
SOUTH CAROLINA REPORTERS' COMMENTS

Under formerly applicable statutory law, the proxy rules for nonprofit corporations were borrowed from Section 33-7-220 of the South Carolina Business Corporation Act. The proxy rules of Section 33-31-724 differ from former law in the following ways: No provision is now made for irrevocable proxies; three years is established as the maximum duration of a proxy; proxies become effective when received by the officer authorized to tabulate votes and not at a date appearing on the proxy form; and there is no counterpart to the antifraud provision of the Business Corporation Act, Section 33-7-220(i).

In many nonprofit corporations, the directors are also the "members" for statutory purposes. Directors taking action as directors may not act by proxy, but directors taking action as the members may.

Section 33-31-725. Cumulative voting for directors.

(a) If the articles provide for cumulative voting by members, members may so vote by multiplying the number of votes the members are entitled

(b) Cumulative voting is not authorized at a particular meeting unless:

(1) the meeting notice or statement accompanying the notice states that cumulative voting will take place; or

(2) a member gives notice during the meeting and before the vote is taken of the member's intent to cumulate votes and if one member gives this notice, all other members participating in the election are entitled to cumulate their votes without giving further notice.

(c) A director elected by cumulative voting may be removed by the members without cause if the requirements of Section 33-31-808 are met unless the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively at an election at which the same total number of votes were cast or, if such action is taken by written ballot, all memberships entitled to vote were voted and the entire number of directors authorized at the time of the director's most recent election were then being elected.

(d) Members may not cumulatively vote if the directors and members are identical.
OFFICIAL COMMENT

Section 7.25 allows the articles or bylaws to authorize cumulative voting. As a condition to cumulative voting subsection (b) requires that the meeting notice or proxy statement state that cumulative voting will take place or that during the meeting a member gives notice of the member's intent to cumulate votes before the vote is taken. These requirements are imposed as cumulative voting should only be allowed if members know or reasonably should know that the election will be by cumulative voting. Otherwise unfair and unintended results will occur as some members will cumulate their vote and others will not.

Section 7.25 also sets forth the mechanics of cumulative voting and protects a minority that has elected a director from having that director removed by the majority.

Subsection (c) provides that protection by prohibiting the removal of a director if those opposing the removal would have been able to elect the director by cumulative voting.

Subsection (d) prevents potentially unintended and unfortunate results by prohibiting cumulative voting when the directors and members are identical. In such situations directors could perpetuate themselves in office by voting cumulatively. If self-perpetuation is desired, it should be done

Former law borrowed the rules for cumulative voting from Section 33-7-280 of the Business Corporation Act. Section 33-31-725 differs from former law in the following respects: It does not specify how directors are to be elected, so that specific provision must be made in the articles or bylaws. It does not contemplate the possibility of advance notice to a corporate officer found in Section 33-7-280(c)(2)(1). It prohibits cumulative voting where the directors and the members are identical.

Section 33-31-725 embodies a presumption that corporations will not have cumulative voting. This is the opposite of the presumption found in Section 33-7-280 of the South Carolina Business Corporation Act.

Section 33-31-726. Other methods of electing directors.

A corporation may provide in its articles or bylaws for election of directors by members or delegates:

(1) on the basis of chapter or other organizational unit;

(2) by region or other geographic unit;

(3) by preferential voting; or

(4) by any other reasonable method.
OFFICIAL COMMENT

As there is no valid reason to limit voting for directors to cumulative or straight voting, section 7.26 allows directors to be elected by three other specified methods and any other reasonable basis. The method of electing directors may not, however, be made up on an ad hoc basis, but must be set forth in or authorized by the articles or bylaws. The board in overseeing an election must comply with the fiduciary standards set forth in section 8.30 regardless of the manner in which the election is conducted.
SOUTH CAROLINA REPORTERS' COMMENTS

This section had no counterpart in the formerly applicable statutory law.

Section 33-31-727. Corporation's acceptance of votes.

(a) If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a member, the corporation if acting in good faith is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the member.

(b) If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the record name of a member, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the member if:

(2) the name signed purports to be that of an attorney-in-fact of the member and if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the member has been presented with respect to the vote, consent, waiver, or proxy appointment;

(3) two or more persons hold the membership as cotenants or fiduciaries and the name signed purports to be the name of at least one of the coholders and the person signing appears to be acting on behalf of all the coholders; and

(4) in the case of a mutual benefit corporation:

(i) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the member and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;

(ii) the name signed purports to be that of a receiver or trustee in bankruptcy of the member and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment.

(c) The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the member.

(d) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the member for the consequences of the acceptance or rejection.

(e) Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.
OFFICIAL COMMENT

Section 7.27 sets forth the rules under which corporations may accept the signature on a vote, consent, waiver, or proxy appointment as that of a member or of someone authorized to act on behalf of the member. Section 7.27 is designed to provide certainty and protect nonprofit corporations and their officers and agents who act in good faith in reliance on its rules. It therefore provides that corporations are entitled to reject a vote, consent, waiver, or proxy appointment if the person authorized to tabulate votes in good faith has reasonable basis for doubt about the

"The phrase `reasonable basis for doubt' about the validity of a signature or about the signer's authority creates an objective standard for the exercise of the authority . . . to reject proffered instruments. In the absence of a proxy fight or a seriously contested issue, instruments should be rejected only if there seems to be no basis for finding the execution regular on its face. In a proxy fight or other contested issue, the possibility of illegal or unauthorized execution is greatly increased, and a more cautious attitude should therefore be adopted." Official Comment to Section 7.24 of the Model Business Corporation Act.

In most instances instruments proportion to be executed by or on behalf of members will in fact have been executed by and on behalf of the member "and the corporation and its officers should be encouraged to accept them rather than to adopt unduly narrow requirements." Official Comment to Section 7.24 of the Model Business Corporation Act.
SOUTH CAROLINA REPORTERS' COMMENTS

This section, as it applies to mutual benefit corporations, is very similar to former law, found at Section 33-7-240 of the South Carolina Business Corporation Act. A substantive difference from former law is the exception of religious and public purpose corporations from the provisions of Section 33-31-727(b)(4).

Section 33-31-730. Voting agreements.

(a) Two or more members may provide for the manner in which they will vote by signing an agreement for that purpose. The agreements may be valid for ten years. For public benefit corporations the agreements must have a reasonable purpose not inconsistent with the corporation's public or charitable purposes.

(b) A voting agreement created under this section is specifically enforceable.
OFFICIAL COMMENT

Section 7.30 validates a written voting agreement signed by two or more members. For public benefit and religious corporations the agreement must be for a proper purpose not inconsistent with the

By contrast to formerly applicable statutory law, found at South Carolina Business Corporation Act Sections 33-7-300 and 33-7-310, no provision is made in this Act for voting trusts. Voting agreements are permitted, but limited to a duration of ten years. The special provisions made for voting agreements relating to public purpose corporations had no counterpart in former law.

Section 33-31-801. Requirement for and duties of board.

(a) Each corporation must have a board of directors.

(b) Except as provided in this chapter or subsection (c), all corporate powers must be exercised by or under the authority of, and the affairs of the corporation managed under the direction of, its board.

(c) The articles may authorize a person or persons to exercise some or all of the powers which would otherwise be exercised by a board. To the extent so authorized, the person or persons shall have the duties and responsibilities of the directors, and the directors shall be relieved to that extent from the duties and responsibilities.
OFFICIAL COMMENT

The Model Act allows considerable flexibility in structuring nonprofit corporations. While every corporation must have a board of directors, the articles may authorize a person or persons to exercise some or all of the powers of the board.

Insofar as the powers of the board are delegated to some other person or persons, that person or persons assume the duties of the board and must meet the standards set forth in sections 8.30-8.33. If the board had no corporate power it would have no duties under sections 8.30-8.33.

In some organizations corporate authority is exercised by a representative assembly or a convention. The board may have little or no corporate power when the assembly or convention is meeting. Corporate power between assemblies or conventions may reside in a board of directors or some other person or persons. The person or persons under whose authority corporate power is exercised has the responsibilities of the board of directors.

The role played by the boards of nonprofit corporations varies widely due to the nature, size, characteristics and needs of the organizations.

In some nonprofit organizations the board is actively involved in the day-to-day activities of the corporation. Board members may carry on all or substantially all of the work of the corporation. In such instances the corporate powers are exercised by the board and the affairs actively managed under the direction of the board.

In other nonprofit corporations the board is significantly involved in fund-raising or other activities and also validates or approves a policy and other decisions made by the corporation's officers and employees. In such instances the corporate powers are exercised under the authority of the board and the affairs are managed under the direction of the board.

In each of the above instances the board has the ultimate authority and responsibility. The authority is exercised and responsibility is carried out in different ways. Each director must meet the standards and is entitled to the protection afforded by sections 8.30-8.33.

Boards of nonprofit corporations are sometimes called boards of trustees, regents, overseers, or by some other name. Section 8.01 applies to the person or group under whose authority corporate powers are exercised and under whose direction the affairs of the corporation are managed, regardless of the name of the person or group.
SOUTH CAROLINA REPORTERS' COMMENTS

This section does not represent a substantial change from previously applicable statutory law, which was found at Section 33-8-101 of the South Carolina Business Corporation Act. The major change is the absence of Section 33-8-101's recognition of a unanimous shareholders' agreement as a corporate governance document.

Similar to the Business Corporation Act, this section authorizes a corporation to include, for example, a provision in the articles which specifies that the members have the authority to appoint all or certain officers of the nonprofit corporation. Note, however, that section 33-31-843(b) gives the board carte blanche authority to remove any officer with or without cause - and possibly this section 33-31-843 would trump an additional simple provision in the articles that the board may not remove an officer appointed by the members. On the other hand, if the articles stated that not only do the members have the exclusive authority to appoint officers but they shall have the exclusive authority to remove officers, this later provision would seem to divest the power of the board to remove the officers appointed by the members.

Section 33-31-802. Qualifications of directors.

Only individuals may serve as directors of nonprofit corporations. The Model Act does not impose qualifications for directors. It does not require directors to be members of the corporation or residents of its state of incorporation. However, articles or bylaws may impose qualifications for election to or service on a board of directors. A corporation may require that each director be a member in good standing of the organization. For example, the Young Republicans may require each director to be under thirty-six and Republican.

An article or bylaw qualification existing at the time an individual is elected a director is valid unless it violates public policy or some law other than the Model Act. If a qualification adopted after the director's term commences would disqualify a director, it cannot be enforced until after the end of the director's term. The procedures for removing a director are set forth in sections 8.08-8.10.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is essentially similar to previously applicable Section 33-8-102 of the South Carolina Business Corporation Act, except that this section requires directors to be natural persons.

Section 33-31-803. Number of directors.

(a) A board of directors must consist of three or more directors, with the number specified in or fixed in accordance with the articles or bylaws.

(b) The number of directors may be increased or decreased, but to no fewer than three, by amendment to or in the manner prescribed in the articles or bylaws.
OFFICIAL COMMENT

Section 8.03 requires nonprofit corporations to have a minimum of three directors, but otherwise allows the number of directors to be specified or fixed in accordance with the articles or bylaws. The articles or bylaws may allow the board to set the number of directors without placing any limit on the maximum number of directors. Alternatively, the articles or bylaws may specify a fixed or maximum number of directors or a range within which the board or the members may determine the number of directors.

The Model Act does not limit the range within which the number of directors may be set. Where control is a factor, the articles or bylaws may appropriately limit the size of the board and the authority of the board to elect directors.

Board size was previously governed by Section 33-8-103 of the South Carolina Business Corporation Act, which permits boards as small as one. The requirement of a minimum of three directors is a change from former law. Former law also limited the percentage by which the board itself could alter its size, even if authorized by the articles of incorporation to make such changes. Section 33-31-103 contains no such limit.

Section 33-31-804. Election, designation, and appointment of directors.

(a) If the corporation has members entitled to vote for directors, all the directors, except the initial directors, must be elected at the first annual meeting of members, and at each annual meeting thereafter, unless the articles or bylaws provide some other time or method of election, or provide that some of the directors are appointed by some other person or designated.

(b) If the corporation does not have members entitled to vote for directors, all the directors, except the initial directors, must be elected, appointed, or designated as provided in the articles or bylaws. If no method of designation or appointment is set forth in the articles or bylaws, the directors, other than the initial directors, must be elected by the board.
OFFICIAL COMMENT

1. Corporations with Members

If a corporation has members, the members are entitled to elect all the directors in the absence of a contrary provision in the articles or bylaws. The articles or bylaws may set forth a simple one-vote-per-member structure or may provide for election by classes, chapters or other organizational units or by region or other geographic groupings. See sections 2.02 and 2.05 as to appointment of initial directors. see sections 7.04, 7.08, 7.21, 7.25 and 7.26 as to the ways in which members may vote.

Section 8.04 should be applied in a manner consistent with the concept that an election procedure must be reasonable. See Dozier v. Automobile Club of Michigan, 69 Mich. App. 114 (1976); Braude v. Havenner, 38 Cal. App. 2d 526, 113 Cal. Rptr. 386 (1974); Valle v. North Jersey Automobile Club, 125 N.J. Super. 302, 310 A.2d 518 (1973). The Model

Even if a corporation has members, the members need not elect all the directors. Some directors may hold office as a result of designation in the articles or bylaws or as a result of being appointed by some person or entity.

Designation occurs when the articles or bylaws name an individual as a director or designate the holder of some office or position as a director. For example, the President of Harvard, the Bishop of New York, or the head of a union may become a director of a corporation pursuant to an article or bylaw provision designating the holder of their position as a director of the corporation. The individual would cease to be a director upon ceasing to hold the designated position.

The articles or bylaws may authorize any person, corporation or entity to appoint a director. A city may want to appoint some or all the directors of a nonprofit corporation without becoming a member of the organization. It could do so by appointing rather than voting for the directors. A person who appoints but does not vote for the directors is not a "member" as that term is used in the Model Act. See section 1.40(21).

2. Corporations Without Members

Section 8.04 authorizes self-perpetuating boards of directors. If a corporation does not have members, the board elects directors in the absence of an article or bylaw provision setting forth some other approach. See sections 2.02 and 2.05 as to appointment of initial directors. See sections 8.21 and 8.24 as to methods by which the board may elect directors.

Section 8.04 also allows all or part of the board to be designated or appointed pursuant to article or bylaw provisions.
SOUTH CAROLINA REPORTERS' COMMENTS

Previously applicable statutory law, found at Sections 33-8-103 and 33-8-104 of the South Carolina Business Corporation Act, provided for annual election of directors with two permitted exceptions: staggering the board (Section 33-8-103(d)) and classifying the board (Section 33-8-104). As to nonprofits with members entitled to vote for directors, Section 33-31-104 permits greater flexibility than did prior law; the articles or bylaws may provide other times or methods of election, or for designation or appointment, without limitation. As the Official Comment points out, classification of the board would fall within this flexibility. Staggering the board is expressly permitted by Section 33-31-806. As to nonprofits without members entitled to vote for directors, subsection (b) provides for

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