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An amendment or restatement of the article does not affect an existing cause of action involving the corporation even if the amendment changes the corporate name. Moreover, an amendment does not affect any requirement or limitation imposed upon the corporation or any property held by it by virtue of any trust upon which such property is held by the corporation. If a public benefit or religious corporation amends its articles to change its purposes, property held by the corporation immediately prior to the effective date of the amendment may remain subject to a limitation based on the prior articles or to restrictions imposed by the donor of the property.

Members may have contract or other legal rights that cannot be altered or eliminated by amendments to the articles.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is identical to Section 33-10-109 of the South Carolina Business Corporation Act. Prior to the adoption of this South Carolina Nonprofit Corporation Act, this Business Corporation Act section was applicable to nonprofit corporations and thus there is no change.

Section 33-31-1020. Amendment of bylaws by directors.

If a corporation has no members, or has no members entitled to vote on an amendment to the bylaws its incorporators, until directors have been chosen, and thereafter its board of directors, may adopt one or more amendments to the corporation's bylaws subject to any approval required pursuant to Section 33-31-1030. The corporation shall provide notice of any meeting of directors at which an amendment is to be approved. The notice shall be in accordance with Section 33-31-822(c). The notice also must state that the purpose, or one of the purposes, of the meeting is to consider a proposed amendment to the bylaws and contain or be accompanied by a copy or summary of the amendment or state the general nature of the amendment. The amendment must be approved by a majority of the directors in office at the time the amendment is adopted.
OFFICIAL COMMENT

Section 10.20 allows directors in a corporation without members to amend the corporate bylaws subject to any approval required of third persons pursuant to section 10.30. The section also sets forth certain

If a corporation does not have members, its incorporators, until directors have been chosen, may exercise the power of the directors in amending articles or bylaws. The incorporators must follow the rules applicable to directors.

Amendments may be adopted by incorporators or by the directors by unanimous written consent. See section 8.21. Notice of a directors' meeting may be waived pursuant to section 8.23.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is entirely new. There is no similar provision in the South Carolina Business Corporation Act since all South Carolina business corporations must have shareholders.

Section 33-31-1021. Amendment of the bylaws by directors and members.

(a) A corporation's board of directors may amend or repeal the corporation's bylaws unless:

(1) the articles of incorporation or this chapter reserves this power exclusively to the members in whole or part or requires the consent of someone pursuant to Section 33-31-1030; or

(2) the members in adopting, amending, or repealing a particular bylaw provide expressly that the board of directors may not adopt, amend, or repeal that bylaw or any bylaw on that subject.

(b) A corporation's members may amend or repeal the corporation's bylaws even though the bylaws also may be amended or repealed by its board of direc- tors.

(c) A notice of a meeting for members at which bylaws are to be adopted, amended, or repealed shall state that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment, or repeal of bylaws and contain or be accompanied by a copy or summary of the proposal.

(d) Unless otherwise provided in the articles, an amendment to the bylaws which relates solely to the dues required for membership and which establishes or changes an amount for, or method of computation of, dues, must be approved by the members.
OFFICIAL COMMENT

Bylaws of nonprofit corporations, like bylaws of business corporations, govern and regulate the activities and affairs of the corporation. Bylaw provisions often parrot provisions of state statutes governing a myriad of matters from the corporate seal to voting and quorum requirements. They serve as a roadmap for members and directors who want to know what

The bylaws of a nonprofit corporation serve an additional function that is not analogous to the bylaws of a business corporation. The bylaws of a nonprofit corporation set forth the rights and duties of members. They are analogous to provisions of preferred stock which set forth the rights, privileges and preferences of preferred shareholders. As the basic rights of members are usually set forth in a nonprofit corporation's bylaws and not its articles, the Model Act requires the same vote to amend bylaws as to amend articles. See Official Comment to Section 10.03.
SOUTH CAROLINA REPORTERS' COMMENTS

In place of the proposed Model Act form, this section has been adopted in a form similar to that of Section 33-10-200 of the South Carolina Business Corporation Act, the previously applicable statute, with the addition of subparagraph (d).

Note that there are restrictions on the power of the directors to adopt bylaws. Section 33-31-1023 provides that if the bylaw amendment is to increase the voting requirement or quorum of members that a very special procedure must be followed in approving the bylaw. Only the members may approve such a bylaw. Section 33-31-1023(b) specifically says that directors have no power to adopt or modify such a bylaw.

Section 33-31-1022. Class voting on bylaw amendment by members.

(a) The members of a class in a public benefit corporation are entitled to vote as a class on a proposed amendment to the bylaws if the amendment would change the rights of that class as to voting in a manner different than such amendment affects another class or members of another class.

(b) The members of a class in a mutual benefit corporation are entitled to vote as a class on a proposed amendment to the bylaws if the amendment would:

(1) affect the rights, privileges, preferences, restrictions, or conditions of that class as to voting, dissolution, redemption, or transfer of membership in a manner different than such amendment would affect another class;

(2) change the rights, privileges, preferences, restrictions, or conditions of that class as to voting, dissolution, redemption, or transfer of membership in a manner different than such amendment would affect another class;

(3) increase or decrease the number of membership authorized for that class;

(4) increase the number of membership authorized for another class;

(6) authorize a new class of memberships.

(c) The members of a class of a religious corporation are entitled to a vote as a class on a proposed amendment to the bylaws only if a class vote is provided for in the articles or bylaws.

(d) If a class is to be divided into two more classes as a result of an amendment to the bylaws of a public benefit or mutual benefit corporation, the amendment must be approved by the members of each class that would be created by the amendment.

(e) If a class vote is required to approve an amendment to the bylaws, the amendment must be approved by the members of the class by two-thirds of the votes cast by the class or a majority of the voting power of the class, whichever is less.

(f) A class of members is entitled to the voting rights granted by this section although the articles and bylaws provide that the class may not vote on the proposed amendment.
OFFICIAL COMMENT

See Official Comment to Comment 10.04.
SOUTH CAROLINA REPORTERS' COMMENTS

This section follows the provision for class voting on amendments to the articles, Section 33-31-1004. It is essentially the same as that section.

Section 33-31-1023. Bylaw increasing quorum or voting requirement for members.

(a) The members may adopt or amend a bylaw that fixes a greater quorum or voting requirement for the members, or any class of members, than is required by this chapter. The adoption or amendment of a bylaw that adds, changes, or deletes a greater quorum or voting requirement for members, if required, must be approved as provided in Section 33-31-1030 and must meet the same quorum requirement and be adopted by the same vote and class vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

(b) A bylaw that fixes a greater quorum or voting requirement for members under subsection (a) may not be adopted, amended, or repealed by the board of directors.
SOUTH CAROLINA REPORTERS' COMMENTS

This is not a Model Act provision. However, it is essentially the same as the formerly applicable statute, Section 33-10-210 in the South Carolina Business Corporation Act.

(a) Subject to any additional approval required by Section 33-31-1030, a bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed:

(1) if originally adopted by the members, only by the members;

(2) if originally adopted by the board of directors, either by the members or by the board of directors.

(b) A bylaw adopted or amended by the members that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed, subject to any additional approval required by Section 33-31-1030, only by a specified vote of either the members or the board of directors.

(c) Action by the board of directors under subsection (a)(2) to adopt or amend a bylaw that changes the quorum or voting requirement for the board of directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
SOUTH CAROLINA REPORTERS' COMMENTS

This is not a Model Act section. It is, however, essentially identical to the formerly applicable statute, Section 33-10-220 of the South Carolina Business Corporation Act.

Section 33-31-1030. Approval of the articles of incorporation and bylaws by third persons.

The articles of only a religious corporation or public benefit corporation may require an amendment to the articles or bylaws to be approved in writing by a specified person or person other than the board. The article provision may be amended only with the approval in writing of such person.
OFFICIAL COMMENT

Section 10.30 validates an article provision that requires a specified person or persons to approve changes in the articles or bylaws. Section 10.390 provides flexibility in control over article and bylaws amendments by allowing parent or affiliated corporations, governmental bodies and others to exercise a veto power over such amendments. It also allows corporations with delegates to require that article or bylaw amendments be approved by the delegates. Due to the broad definition of the word "person" even a member or members may be given the right to disapprove an amendment to the articles or bylaws.

Consideration was given to the fact that similar provisions have caused problems in the mutual benefit corporate area. Real estate developers have given themselves veto powers over homeowner corporations which they set up to manage developments. If the developer goes bankrupt or merely vanishes before he is out of the project and relinquishes his rights, there may be substantial confusion as to how the corporation is to act.

Consideration was given to providing that mutual benefit corporations could adopt non-member veto powers which would be null and void if the appointed person could not be found, or was bankrupt and did not appoint a successor. However, such a provision was deemed to create more problems than it might solve.

Therefore, it was ultimately determined that the best solution was to prohibit mutual benefit corporations from being able to grant a veto power to a third party.

Section 33-31-1031. Amendment terminating members or redeeming or canceling memberships.

(a) An amendment to the articles or bylaws of a public benefit or mutual benefit corporation that would terminate all members or a class of members or redeem or cancel all memberships or a class of memberships must meet the requirements of this chapter.

(b) Before adopting a resolution proposing the amendment, the board of a mutual benefit corporation shall give notice of the general nature of the amendment to the members.

(c) After adopting a resolution proposing such an amendment, the notice to members proposing the amendment shall include one statement of up to five hundred words opposing the proposed amendment if the statement is submitted by any five members or members having three percent or more of the voting power, whichever is less, not later than twenty days after the board has voted to submit the amendment to the members for their approval. In public benefit corporations, the production and mailing costs

(d) Any such amendment must be approved by the members by two-thirds of the votes cast by each class.

(e) The provisions of Section 33-31-621 do not apply to any amendment meeting the requirements of this chapter.
OFFICIAL COMMENT

Section 10.31 sets forth the procedures that must be followed to amend articles or bylaws to terminate all members or any class of members or redeem or cancel all memberships or any class of memberships. The procedures are in addition to the normal requirements for amending articles or bylaws and are required due to the extraordinary nature of the amendment. See section 1.40(5) for the definition of "class."

Some public benefit corporations may decide that the benefits of having members are outweighed by the costs, possible harassment, or lack of contribution by members. If so, section 10.31 provides a method of amending articles or bylaws to convert from a membership corporation to a corporation with a self-perpetuating board of directors. The board in proposing such an amendment must meet its fiduciary obligations under section 8.30. While there is no requirement that the board notify the members before it adopts such a resolution, some boards may wish to do so to avoid conflict and determine the attitude of members at an early stage. After adopting the proposed amendment, the board must wait twenty days before sending a notice to the members proposing the amendment. If during the twenty-day period a written statement of up to 500 words opposing the proposed amendment is submitted by any five members or members having three percent or more of the voting power, whichever is less, and the members pay the production and mailing costs of the statement, the board must mail the statement with the notice to members proposing the amendment. The board is only obligated to mail one statement. If more than one statement is proposed, the board usually should use the statement presented by the most members.

An amendment proposing to convert from a membership corporation to a corporation with a self-perpetuating board has a different significance in a mutual benefit corporation. Mutual benefit corporations should operate for the benefit of their members. While there was considerable sentiment on the Committee to require mutual benefit corporations to have members, on balance it was believed that the disadvantages of such a rigid requirement outweighed its advantages. Once a mutual benefit corporation has members, the Committee believed that it should be required to provide the fullest and fairest forum possible before terminating those members.

The provisions of section 10.31 are not applicable to situations in which the board desires to terminate a certain person or a small group of persons without affording them their rights under sections 6.21 and 6.22. An amendment proposed for such a reason would breach the board's duties under section 8.30.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is entirely new and has no counterpart in either the former Chapter 31, Title 33 or the South Carolina Business Corporation Act.

Section 33-31-1101. Approval of plan of merger.

(a) Subject to the limitations set forth in Section 33-31-1102, one or more nonprofit corporations may merge into a business or nonprofit corporation, and one or more business corporations may merge into a nonprofit corporation to the extent permitted in Section 33-11-101, if the plan of merger is approved as provided in Section 33-31-1103.

(b) The plan of merger must set forth:

(1) the name of each corporation planning to merge and the name of the surviving corporation into which each plans to merge;

(2) the terms and conditions of the planned merger;

(3) the manner and basis, if any, of converting the members of each public benefit or religious corporation into members of the surviving corporation;

(4) if the merger involves a mutual benefit corporation, the manner and basis, if any, of converting membership of each merging corporation

(c) The plan of merger may set forth:

(1) any amendments to the articles of incorporation or bylaws of the surviving corporation to be effected by the planned merger; and,

(2) other provisions relating to the planned merger.
OFFICIAL COMMENT

Chapter 11 authorizes mergers involving nonprofit corporations if specified conditions are met. In a merger one or more corporations merge and disappear into a surviving corporation. The surviving corporation continues and owns all the property of each party to the merger and is liable for the liabilities and obligations of each party to the merger. See sections 11.05 and 11.07.

As it is usually more advantageous for one of the parties to a merger to survive, the Model Act does not provide for "consolidations" in which all the parties merge and disappear into a new corporation. If two or more corporations desire to merge their activities, but do not desire to continue one of the existing corporations, a new corporation can be incorporated and the existing corporations merged into it. By following this approach a "consolidation" of existing corporations can be achieved.

The Model Act does not provide for dissenters' rights. As members of a public benefit or religious corporation have no economic interest in their corporation they cannot be given cash as the result of a merger. Therefore they cannot have dissenters' rights. While members of a mutual benefit corporation may have an economic interest in their corporation, the concept of dissenters' rights seems inappropriate in the nonprofit context. While memberships in mutual benefit corporations may be valuable, most memberships do not represent an investment that will generate a profit on their sale. Consequently it is inappropriate to give a member an automatic right to cash by exercising dissenters' rights and in effect "selling" a membership.

A member of a nonprofit corporation may file a proceeding to enjoin or rescind a merger. A member of a mutual benefit corporation may also sue for damages. Where the provisions of this chapter have been complied with and the board has met its statutory duties of care and loyalty, a court should uphold a merger. Where a merger is improperly approved, the Model Act does not specify the remedy, if any. A court may consider all relevant facts including the good faith of the parties, the fairness of the merger, the effect of the merger, the nature of any omission or misstatement of fact, whether the failure to comply with the provisions of this chapter was serious and substantive or technical and unimportant,

The Model Act does not authorize short form mergers or the nonprofit equivalent of a reorganization by share exchange. These procedures are appropriate in the business, but not the nonprofit, context.
SOUTH CAROLINA REPORTERS' COMMENTS

Except as to churches, the former nonprofit statute, Chapter 31, Title 33 made no specific provision for the merger of nonprofit corporations. The former Chapter 33 did provide that churches could consolidate:
Any two or more church corporation, having no capital stock, existing under the laws of this State for religious purposes may consolidate into a single corporation which may be any one of such consolidated corporations or a new corporation to be formed by means of such consolidation. (Former Section 33-33-10)

Although the language in part differs, much of this section is identical with Section 33-11-101 of the South Carolina Business Corporation Act which was previously applicable to non-church mergers.

If the nonprofit corporation intends to merge with a business corporation, Sections 33-1-400(5), 33-20-103, and 33-11-101 likewise permit the business corporation to be a party to the merger. However, if a nonprofit and business corporation merge, the plan must include the requirements of both Sections 33-31-1101 and 33-11-101.

The terms and conditions of the planned merger shall include the manner and basis, if any, of converting the securities of each business corporation into membership or obligations of the surviving or any other corporation or into cash or other property in whole or in part.

Under certain limited circumstances, Section 33-31-1104(a)(4) permits a public benefit corporation (or religious corporation) to merge into either a business corporation or a mutual benefit corporation. Section 33-31-1101(a)(3) does not seem to specify what interest the members of the public benefit or religious corporation would receive in such a merger with a business corporation. This "omission" is intentional. The members are not permitted to receive anything in such a merger. Section 33-31-1104(c) provides that no member of a public benefit or religious corporation may receive anything other than another membership. To permit otherwise would be to provide a method whereby public or religious assets might be diverted to private uses.

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