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Section 14.01 requires a majority of the incorporators or directors to vote for dissolution, not just a majority of a quorum. This higher-than-normal vote is required because dissolution is a basic corporate change. The articles, bylaws or some other state law may require an even higher vote or approval of a third person or governmental entity. See sections 14.01(a) and 8.24.

As dissolution is a fundamental corporate change, subsection (b) requires the corporation to notify each director or incorporator of a meeting at which dissolution will be approved. The notice must state that dissolution will be considered at the meeting.
SOUTH CAROLINA REPORTERS' COMMENTS

1. Comparable statutes

This section is similar to Section 33-14-101 of the South Carolina Business Corporation Act which governed nonprofit corporations prior to the adoption of this South Carolina Nonprofit Corporation Act.
2. Differences from Model Act

Different from the Model Act, this section only provides for dissolution by incorporators. (The Model Act also permits directors to dissolve under this section.) Director dissolution in South Carolina is dealt with in Section 33-31-1402(b).

Section 33-31-1402. Dissolution by directors, members, and third persons.

(a) Unless this chapter, the articles, or bylaws require a greater vote or voting by class, dissolution is authorized if it is approved:

(1) by the board;

(2) by the members, if any, by two-thirds of the votes cast or a majority of the voting power, whichever is less; and

(3) in writing by any person whose approval is required by a provision of the articles authorized by Section 33-31-1030 for an amendment to the articles or bylaws.

(b) If the corporation does not have members or has no members entitled to vote on dissolution, dissolution must be approved by a vote of a majority of the directors in office at the time the transaction is approved. In addition, the corporation shall provide notice of any directors' meeting at which approval is to be obtained in accordance with Section

(c) If the board seeks to have dissolution approved by the members at a membership meeting, the corporation shall give notice to its members of the proposed membership meeting in accordance with Section 33-31-705. The notice also must state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation and contain or be accompanied by a copy or summary of the plan of dissolution.

(d) If the board seeks to have dissolution approved by the members by written consent or written ballot, the material soliciting the approval shall contain or be accompanied by a copy or summary of the plan of dissolution.

(e) The plan of dissolution shall indicate to whom the assets owned or held by the corporation will be distributed after all creditors have been paid.
OFFICIAL COMMENT

Section 14.02 allows the board to propose and the members to authorize dissolution of a nonprofit corporation. The board in proposing dissolution must submit a plan of dissolution to the members. The plan must indicate to whom the assets owned or held by the corporation will be distributed after creditors have been paid. If the assets will be distributed to the members, it should be sufficient to so indicate without setting forth the name of each member. If the board has determined that assets will be distributed to other organizations and the names of the organizations are known, the names should be specified. If the board has discretion in distributing the assets, the board should indicate that the assets shall be distributed to such individuals and entities as it subsequently decides.

In seeking member approval, the board must give written notice of a membership meeting pursuant to section 7.05 and indicate that dissolution will be considered at the meting. In the alternative, the board may seek member approval by written consent pursuant to section 7.04 or written ballot pursuant to section 7.08. If approval by written consent or written ballot is sought, the material soliciting the approval must contain or be accompanied by a copy or summary of the plan of dissolution.

Approval of dissolution at a membership meeting normally requires two-thirds of the votes cast or a majority of the voting power, whichever is less. The articles, bylaws, board or members may require a greater vote or voting by class. If approval is sought by written consent pursuant

Public benefit corporations must give the attorney general the written notice required by section 14.03(a). The attorney general is authorized to take appropriate action to protect the public interest and assets held in trust. See section 1.70.
SOUTH CAROLINA REPORTERS' COMMENTS
1. Comparable sections

This provision is comparable to both Sections 33-31-1103 (dealing with mergers of nonprofit corporations) and 33-31-1202 (dealing with sale of assets). The similar provision in the South Carolina Business Corporation Act is Section 33-14-102.
2. Non-Model Act provisions

This is the only section which provides for directors by themselves to dissolve a corporation. (Section 14.01 of the Model Act also includes director dissolution.) This section notes that the corporation might have members who are not entitled to vote on dissolution. If so, the directors dissolve the corporation. This is left unclear in the Model Act. The shareholders or directors may condition their approval on a higher percentage of votes but only if so provided in the articles or bylaws.

The Model Act also includes a provision which permits both the board and members to condition this approval on the receipt of a higher vote or any other basis. Although this language does not appear in this South Carolina section, the board or members could reserve the power to condition this approval on the receipt of a higher vote, but must do so in the articles or bylaws. This change is in keeping with the changes to Sections 33-31-1003 and 33-31-1202. It was determined that all voting modifications belong in the articles or bylaws. In increasing the vote required of either directors or members, consideration also must be given to Sections 33-31-1023 and 33-31-1024. These provisions require that before raising the vote required to adopt certain issues, the resolution to increase the vote must pass by the same greater quorum or vote.

Section 33-31-1403. Notices to the Attorney General.

(a) A public benefit or religious corporation shall give the Attorney General written notice that it intends to dissolve at or before the time it delivers articles of dissolution to the Secretary of State. The notice shall include a copy or summary of the plan of dissolution.

(b) No assets may be transferred or conveyed by a public benefit or religious corporation as part of the dissolution process until twenty days after it has given the written notice required by subsection (a) to the Attorney General or until the Attorney General has consented in writing

(c) When all or substantially all of the assets of a public benefit corporation have been transferred or conveyed following approval of dissolution, the board shall deliver to the Attorney General a list showing those, other than creditors, to whom the assets were transferred or conveyed. The list shall indicate the addresses of each person, other than creditors, who received assets and indicate what assets each received.
OFFICIAL COMMENT

Section 14.03 requires public benefit and religious corporations to give the attorney general written notice that they intend to dissolve at the same time as or before delivering articles of dissolution to the secretary of state. The notice must include a copy or summary of the plan of dissolution. The corporation may not transfer any assets as part of the dissolution process until twenty days after it has given this notice to the attorney general. The attorney general may waive this twenty-day period by consenting in writing to the dissolution or indicating in writing that he or she will take no action in respect to the transfer. The prohibition on transfers applies only to transfers made as part of the dissolution process. Transfers in the regular course of a corporation's activities are not affected by the notice requirement of section 14.03.

Subsection (c) requires the board of a public benefit corporation to deliver to the attorney general a list of those to whom the corporate assets have been transferred. The list must show the name and address of each person (other than creditors) who received assets and state what assets each received. The list must be given to the attorney general when substantially all of the assets have been transferred. This list provides a record should there be a question as to the propriety of any transfer. No such requirement is imposed on mutual benefit or religious corporations.
SOUTH CAROLINA REPORTERS' COMMENTS

This section has no counterpart in the former nonprofit statutes and no counterpart in the South Carolina Business Corporation Act.

In keeping with the provisions dealing with sale of assets, this section requires even religious corporations (along with public benefit corporations) to notify the Attorney General before dissolving. Consideration was given as to whether twenty days was too long or too short. It was determined that this was an appropriate time.

Section 33-31-1404. Articles of dissolution.

(a) At any time after dissolution is authorized, the corporation may dissolve by delivering to the Secretary of State articles of dissolution setting forth:

(3) a statement that dissolution was approved by a sufficient vote of the board, or incorporators if dissolution is pursuant to Section 33-31-1401;

(4) if approval of members was not required, a statement to that effect and a statement that dissolution was approved by a sufficient vote of the board of directors or incorporators;

(5) if approval by members was required:

(i) the designation, number of memberships outstanding, number of votes entitled to be cast by each class entitled to vote separately on dissolution, and number of votes of each class indisputably voting on dissolution; and

(ii) either the total number of votes cast for and against dissolution by each class entitled to vote separately on dissolution or the total number of undisputed votes cast for dissolution by each class and a statement that the number cast for dissolution by each class was sufficient for approval by that class.

(6) if approval of dissolution by some person or persons other than the members, the board, or the incorporators is required pursuant to Section 33-31-1402(a)(3), a statement that the approval was obtained; and

(7) if the corporation is a public benefit or religious corporation, that the notice to the Attorney General required by Section 33-31-1403(a) has been given.

(b) A corporation is dissolved upon the effective date of its articles of dissolution.
OFFICIAL COMMENT

Unless the articles of dissolution specify a later effective date a corporation is dissolved upon filing articles of dissolution with the secretary of state. Thereafter the corporation is a "dissolved corporation," although its corporate existence continues for purposes of winding up under section 14.06.

The articles of dissolution may be filed at any time after dissolution is authorized. A corporation may file articles of dissolution immediately after dissolution is authorized so that dissolution becomes a matter of public record. Alternatively, it may wait and file articles at or near the end of the winding up process. After dissolution is authorized, the corporation may commence the winding up process even though it has not filed the articles of dissolution.

1. Comparable provisions

This section is similar to the formerly applicable statute, Section 33-14-103 of the South Carolina Business Corporation Act.
2. Non-Model Act provisions

Subsection "(a)(3)" was reworded to define the contents of the articles of dissolution if dissolution is pursuant to Section 33-31-1401, dissolution by the incorporators.
3. Delayed effective date

The articles of dissolution are permitted to provide a delayed effective date. This is provided in Section 33-31-123.

Section 33-31-1405. Revocation of dissolution.

(a) A corporation may revoke its dissolution within one hundred twenty days of its effective date.

(b) Revocation of dissolution must be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke the dissolution without action by the members or any other person.

(c) After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the Secretary of State for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth:

(1) the name of the corporation;

(2) the effective date of the dissolution that was revoked;

(3) the date that the revocation of dissolution was authorized;

(4) if the corporation's board of directors, or incorporators, revoked the dissolution, a statement to that effect;

(5) if the corporation's board of directors revoked a dissolution authorized by the members alone or in conjunction with another person, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization; and

(6) if member or third person action was required to revoke the dissolution, the information required by Section 33-31-1404(a)(5) and (6).

(d) Revocation of dissolution is effective upon the effective date of the articles of revocation of dissolution.

(e) When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes carrying on its activities as if dissolution had never occurred.

Section 14.05 allows the corporation to revoke dissolution within 120 days after its effective date. Normally revocation must be authorized in the same manner as the dissolution was authorized. Consequently if member or third person approval was required for dissolution, member or third person approval is required for revocation. Where, however, those authorizing the dissolution authorize the directors acting alone to revoke the dissolution, the directors may revoke the dissolution without the consent of any other person.

Dissolution is revoked when the corporation delivers articles of revocation of dissolution together with a copy of its articles of dissolution to the secretary of state. The winding up process ceases upon filing the articles of revocation of dissolution; the corporation is no longer a "dissolved corporation," and normal corporate activities recommence.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is very similar to Section 33-14-104 of the South Carolina Business Corporation Act. The South Carolina Business Corporation Act requires reporting the votes of any voting group, and this nonprofit statute requires disclosure as to the approval required of any third party.

Section 33-31-1406. Effect of dissolution.

(a) A dissolved corporation continues its corporate existence but may not carry on any activities except those appropriate to wind up and liquidate its affairs, including:

(1) preserving and protecting its assets and minimizing its liabilities;

(2) discharging or making provision for discharging its liabilities and obligations;

(3) disposing of its properties that will not be distributed in kind;

(4) returning, transferring, or conveying assets held by the corporation upon a condition requiring return, transfer, or conveyance, which condition occurs by reason of the dissolution, in accordance with such condition;

(5) transferring, subject to any contractual or legal requirements, its assets as provided in or authorized by its articles of incorporation or bylaws;

(6) if the corporation is a public benefit or religious corporation, and no provision has been made in its articles or bylaws for distribution of assets on dissolution, transferring, subject to any contractual or legal requirement, its assets:

(i) to one or more entities described in Section 501(c)(3) of the Internal Revenue Code, to the United States, to a state, or to a political subdivision of the United States or a state, for a public purpose, or

(ii) if the dissolved corporation is not described in Section 501(c)(3) of the Internal Revenue Code, to one or more public benefit or religious corporations or to one or more of the entities described in (i) above;

(7) if the corporation is a mutual benefit corporation and no provision has been made in its articles or bylaws for distribution of assets on dissolution, transferring its assets to its members or, if it has no members, to those persons whom the corporation holds itself out as benefitting or serving; and

(8) doing every other act necessary to wind up and liquidate its assets and affairs.

(b) Dissolution of a corporation does not:

(1) transfer title to the corporation's property;

(2) subject its directors or officers to standards of conduct different from those prescribed in Sections 33-31-801 through 33-31-858;

(3) change quorum or voting requirements for its board or members; change provisions for selection, resignation, or removal of its directors or officers or both; or change provisions for amending its bylaws;

(4) prevent commencement of a proceeding by or against the corporation in its corporate name;

(5) abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution; or

(6) terminate the authority of the registered agent.
OFFICIAL COMMENT

Section 14.06 spells out the effect of filing articles of dissolution. A corporation is a "dissolved corporation" after it has filed articles of dissolution. It continues its existence, but may only carry on activities necessary or desirable to wind up and liquidate its affairs. Subsection (a) spells out some, but not all, of the activities in which a dissolved corporation may engage.

In general, the corporation is charged with preserving and protecting its assets and discharging or making provision for discharging its liabilities and obligations. In some instances it may not be possible or desirable to discharge obligations immediately. For example, if a debt is due over a period of time it may be desirable to set up a fund that will pay the debt as it matures. When all corporate debts and obligations have been

If it holds assets on a condition requiring their return, the assets must be returned pursuant to the condition. For example, some charities hold assets that they may use so long as they operate. Upon dissolution these charities may have to return the assets to their donor or transfer the assets to another charity.

Where a corporation has an article or bylaw specifying the distribution of assets upon dissolution, that article or bylaw should be followed subject to any legal or contractual limitations.

All nonprofit corporations formed under the present version of the Model Act are required to indicate in their articles how they assets will be distributed upon dissolution. See section 2.02(a)(7). However, the articles may simply authorize the board to distribute the assets to an organization recognized as exempt under section 501(c)(3) of the Internal Revenue Code. The articles may not specify the particular organization that is to receive the assets, but leave the ultimate decision to the discretion of the board. The articles and bylaws of nonprofit organizations formed before the present version of the Model Act may not specify the disposition of assets upon dissolution.

Where there is no article or bylaw provision specifying to whom assets should be distributed upon dissolution, section 14.06 distinguishes among public benefit, mutual benefit and religious corporations. For public benefit and religious corporations section 14.06(a)(6) requires assets to be distributed to one or more persons described in section 501(c)(3) of the Internal Revenue Code [or a governmental entity] or, if the dissolved corporation is not described in section 501(c)(3), to one or more public benefit or religious corporations. In no event may the assets be distributed to members of a public benefit or religious corporation unless they are entities authorized to receive assets by section 14.06. They might, for example, be recognized as exempt under section 501(c)(3) of the Internal Revenue Code. All distributions are subject to contractual and other legal requirements upon the corporation.

The limitations on distributions by public benefit and religious corporations are essential elements of the nondistribution constraint. It assures that the assets of a public benefit or religious corporation cannot be accumulated and then distributed for the private benefit of members upon the corporation's dissolution.

While members of a mutual benefit corporation are not entitled to distributions while their corporation is operating, they may receive corporate assets upon dissolution. Consequently, if no provision has been

As a result of section 14.06(b) the rights, powers and obligations of the directors and members of a dissolved corporation do not change during the winding up process and suits involving the corporation are not affected by the dissolution.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is only somewhat similar to the formerly applicable statute, Section 33-14-105 of the South Carolina Business Corporation Act.

If a corporation intends to be a public benefit or religious corporation that comes within the exemptions provided by Section 501(c)(3) of the Internal Revenue Code, it must make provision in its governance documents, normally in its articles or bylaws, that upon dissolution its assets will be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or to the federal, state, or local government, for a public purpose.

The class of entities to which assets may be distributed on dissolution has been expanded to negate any implication in Section 33-31-1406 that only Section 501(c)(3) organizations are eligible recipients of liquidating distributions. An organization wishing to be recognized as tax exempt should include specific provisions in its articles to meet the requirements of tax exemption. See South Carolina Reporters' Comment 4 to Section 33-31-202.

Section 33-31-1407. Known claims against dissolved corporation.

(a) A dissolved corporation may dispose of the known claims against it by following the procedure described in this section.

(b) The dissolved corporation shall notify its known claimants in writing of the dissolution at any time after its effective date. The written notice must:

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