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(2) provide a mailing address where a claim may be sent;

(3) state the deadline, which may not be fewer than one hundred twenty days from the effective date of the written notice, by which the dissolved corporation must receive the claim; and

(4) state that the claim will be barred if not received by the deadline.

(c) A claim against the dissolved corporation is barred:

(1) if a claimant who was given written notice under subsection (b) does not deliver the claim to the dissolved corporation by the deadline;

(2) if a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within ninety days from the effective date of the rejection notice and the rejection notice stated that a proceeding to enforce the claim must be commenced within ninety days.

(d) For purposes of this section `claim' does not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.
OFFICIAL COMMENT

Section 14.07 and 14.08 provide a new and simplified system for handling known and unknown claims against a dissolved corporation, including claims based on events that occur after the dissolution of the corporation. Section 14.07 deals solely with known claims while section 14.08 deals with unknown or subse- quently arising claims. A claim is a `known' claim even if this is unliquidated (see section 14.07(d)); a claim that is contingent or has not matured so that there is no immediate right to bring suit is not a `known' claim.

Known claims are handled in section 14.07 through a process of written notice to claimants; the written notice must contain the information described in section 14.07(b). Section 14.07(c) then provides fixed deadlines by which claims are barred under various circumstances, as follows:

(1) If a claimant receives written notice satisfying section 14.07(b) but fails to file the claim by the deadline specified by the corporation, the claim is barred by section 14.07(c)(1).

(2) If a claimant receives written notice satisfying section 14.07(b) and files the claim as required:

(i) if the corporation rejects the claim, the claimant must commence a proceeding to enforce the claim within the ninety days of the rejection or the claim is barred by section 14.07(c)(2); or

(3) If the corporation publishes notice under section 14.08, a claimant who was not notified in writing is barred unless he commences a proceeding within five years after publication of the notice.

(4) If the corporation does not publish notice, a claimant who was not notified in writing is not barred by section 14.07(c) from pursuing his claim.

These principles, it should be emphasized, do not lengthen statutes of limitation applicable under general state law. Thus claims that are not barred under the foregoing rule for example, if the corporation does not act on a claim will nevertheless be subject to the general statute of limitations applicable to claims of that type. Official Comment to Section 14.06 of the Model Business Corporation Act.
SOUTH CAROLINA REPORTERS' COMMENTS

1. Similar provisions

This section is identical with Section 33-14-106 of the South Carolina Business Corporation Act. This section governed nonprofit corporations prior to the adoption of this South Carolina Nonprofit Corporation Act.
2. Non-Model Act provisions

This South Carolina provision notes that before a claim can be barred for failure of the claimant to bring a law suit, the notice to the claimant must warn the claimant that the lawsuit must be filed. This identical language appears in the South Carolina Business Corporation Act, Section 33-14-106(c)- (2).
3. Claims against members

If a corporation does not pay, or properly make provision for paying the known creditors whose claims are properly presented, the individual members are liable for such claims up to the amount of the distribution they receive. Such a distribution would be a wrongful distribution in violation of Section 33-31-833 and as provided in Section 33-31-833, through subrogation to the wrongful director's rights, the creditor may recover from "each person who received . . . [the] distribution for the amount of the distribution whether or not the person receiving the distribution knew it was made in violation of this Act." It is therefore unnecessary to have in this Section 33-31-1407 language similar to Section 33-31-1408(d) and no implication should be drawn that a "known creditor" is in any manner barred from going against the members if the corporation is unable to pay simply because this section does not include wording similar to Section 33-31-1408(d). In fact, the "known creditor" would not

Section 33-31-1408. Unknown claims against dissolved corporation.

(a) A dissolved corporation also may publish notice of its dissolution and request that persons with claims against the corporation present them in accordance with the notice.

(b) The notice must:

(1) be published one time in a newspaper of general circulation in the county where the dissolved corporation's principal office, or, if none in this State, its registered office, is or was last located;

(2) describe the information that must be included in a claim and provide a mailing address where the claim may be sent; and

(3) state that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within two years after publication of the notice.

(c) If the dissolved corporation publishes a newspaper notice in accordance with subsection (b), the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved corporation within two years after the publication date of the newspaper notice:

(1) a claimant who did not receive written notice under Section 33-31-1407;

(2) a claimant whose claim was timely sent to the dissolved corporation but not acted on; and

(3) a claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.

(d) A claim may be enforced under this section:

(1) against the dissolved corporation, to the extent of its undistributed assets; or

(2) if the assets have been distributed in liquidation, against any person, other than a creditor of the corporation, to whom the corporation distributed its property to the extent of the distributee's pro rata share of the claim or the corporate assets distributed to such person in liquidation, whichever is less, but the distributee's total liability for all claims under this section may not exceed the total amount of assets distributed to the distributee.
OFFICIAL COMMENT

"Earlier versions of the Model Act did not recognize the serious problem created by possible claims that might arise long after the

The solution adopted in section 14.08 is to continue the liability of a dissolved corporation for subsequent claims for a period of five years after it publishes notice of dissolution. It is recognized that a five year cut-off is itself arbitrary, but it is believed that the great bulk of post dissolution claims will arise during this period. This provision is therefore believed to be a reasonable compromise between the competing considerations of providing a remedy to injured plaintiffs and providing a period of repose after which dissolved corporations may distribute remaining assets free of all claims. . . .

Directors must generally discharge or make provisions for discharging all of the corporation's liabilities before distributing the remaining assets . . . . But section 14.08 does not contemplate that liquidating distributions . . . . will be deferred until all possible claims are barred under section 14.08. Many claims covered by this section are of a type for which provision may be made by the purchase of insurance or by the setting aside of a portion of the assets, thereby permitting prompt distributions in liquidation. Claimants, of course, may always have recourse to the remaining assets of the dissolved corporation. See section 14.08. Further, where unexpected claims arise after distributions have been made to [persons other than creditors] in liquidation, section 14.08(2) authorizes recovery against the [persons] receiving the earlier distributions. The recovery, however, is limited to the smaller of the recipient [member's] pro rata share of the claim or the total amount of assets received as liquidating distributions by the [member] from the corporation. The provision ensures that claimants seeking to recover distributions from [members] will try to recover from the entire class of [members] rather than concentrating only on the larger [members] . . . ." Official Comment to section 14.07 of the Model Business Corporation Act.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is very similar to Section 33-14-107 of the South Carolina Business Corporation Act. However, the Business Act does not bar a contingent claim or a claim occurring after dissolution even if newspaper notice is given and no filing is made within two years. These are barred under this nonprofit provision. Different from the Model Act, all filings must be made within two years rather than five years. There was no comparable provision to this section in the former nonprofit corporate statutes.

The Secretary of State may commence a proceeding under Section 33-31-1421 to administratively dissolve a corporation if the:

(1) corporation does not deliver a report of change of principal office when due;

(2) corporation is without a registered agent or registered office in this State;

(3) corporation does not notify the Secretary of State that its registered agent or registered office has been changed, that its registered agent has resigned, or that its registered office has been discontinued;

(4) corporation's period of duration, if any, stated in its articles of incorporation expires; or,

(5) corporation has been adjudicated bankrupt pursuant to Chapter 7 of the United States Bankruptcy Code.
OFFICIAL COMMENT

Section 14.20 sets forth the limited circumstances in which a nonprofit organization may be dissolved administratively. The secretary of state is authorized but is not required to commence dissolution proceedings for the reasons set forth in section 14.20. The secretary of state may commence the proceedings immediately or may give additional notices or time to the offending corporation. An administrative dissolution saves the time, money, and effort that might otherwise be required for a judicial dissolution. This is particularly important in the nonprofit area as numerous corporations with insignificant funds may fade into oblivion without any responsible person following the formalities required for a voluntary dissolution. The notice provisions of section 14.21 are designed to give the offending corporation an opportunity to avoid dissolution. Where, however, the corporation has been administratively dissolved it still has two years to be reinstated. See section 14.22.

When a corporation has been administratively dissolved, its corporate name is available for use by other corporations.
SOUTH CAROLINA REPORTERS' COMMENTS

1. New section is comparable to Section33-14-200

This section is very similar to Section 33-14-200 of the South Carolina Business Corporation Act. Although the South Carolina Business Corporation Act requires the Secretary of State to commence dissolution if the corporation has failed to take the required actions, this nonprofit section gives the Secretary of State discretion. It was determined that nonprofit corporations may often inadvertently overlook various filing requirements and it would be preferable to grant more discretion on the

Business corporations which fail to file a tax return or pay taxes due may also be administratively dissolved. Since nonprofit corporations do not pay income or franchise taxes there is no provision to dissolve a nonprofit corporation for failing to pay a tax or file a return.
2. Differences from Model Act

In keeping with the South Carolina Business Corporation Act, immediately upon the occurrence of a disqualifying act, e.g., the failure to have a statutory agent, the Secretary of State may begin the process of administratively dissolving the corporation. The Model Act grants various grace periods not found in this South Carolina provision. Paragraph (a)(5) is not a Model Act provision and permits the Secretary of State to dissolve a corporation which pursuant to Chapter 7 has been adjudicated as bankrupt. Failure to file a tax return is not grounds for dissolution.

Section 33-31-1421. Procedure for and effect of administrative dissolution.

(a) Upon determining that one or more grounds exist under Section 33-31-1420(a) for dissolving a corporation, the Secretary of State may serve the corporation with written notice of that determination under Section 33-31-504, and in the case of a public benefit corporation shall also notify the Attorney General in writing.

(b) If the corporation does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the Secretary of State that each ground determined by the Secretary of State does not exist within at least sixty days after service of the notice is perfected under Section 33-31-504, the Secretary of State shall administratively dissolve the corporation by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The Secretary of State shall file the original of the certificate and serve a copy on the corporation under Section 33-31-504, and in the case of a public benefit or religious corporation shall notify the Attorney General in writing.

(c) A corporation administratively dissolved continues its corporate existence but may not carry on any activities except those necessary to wind up and liquidate its affairs under Section 33-31-1406 and notify its claimants under Sections 33-31-1407 and 33-31-1408.

(d) The administrative dissolution of a corporation does not terminate the authority of its registered agent.
OFFICIAL COMMENT

Section 14.21 requires the secretary of state to give corporations 60 days' notice before it is administratively dissolved for one of the reasons

This section is comparable to the formerly applicable statute, Section 33-14-210 of the South Carolina Business Corporation Act. However, different from the Business Corporation Act, (1) the Secretary of State under this section has discretion whether to begin administrative dissolution procedures, and (2) a nonprofit corporation will not be dissolved for failing to pay an income or franchise tax or failing to file a return since nonprofit corporations do not pay an income or franchise tax. Different from the Model Act is the requirement in subsection (b) that if the corporation does not cure the defect once formal administrative proceedings have been commenced, that the Secretary of State shall dissolve the corporation. The Model Act grants additional discretion to the Secretary of State whether to complete the once-started proceedings.

Section 33-31-1422. Reinstatement following administrative dissolution.

(a) A corporation administratively dissolved under Section 33-31-1421 may apply to the Secretary of State for reinstatement within two years after the effective date of dissolution. The application must:

(1) recite the name of the corporation and the effective date of its administrative dissolution;

(2) state that the ground or grounds for dissolution either did not exist or have been eliminated;

(3) state that the corporation's name satisfies the requirements of Section 33-31-401.

(b) If the Secretary of State determines that the application contains the information required by subsection (a) and that the information is correct, the Secretary of State shall cancel the certificate of dissolution and prepare a certificate of reinstatement reciting that determination and the effective date of reinstatement, file the original of the certificate, and serve a copy on the corporation under Section 33-31-504.

(c) When reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation shall resume carrying on its activities as if the administrative dissolution had never occurred.

Section 14.22 provides a two-year period after the effective date of an administrative dissolution to apply to the secretary of state for reinstatement. No court proceeding is needed. The secretary of state may cancel the dissolution and prepare a certificate of reinstatement that relates back to the effective date of the administrative dissolution. The secretary of state should issue the certificate of reinstatement if the application for reinstatement meets the requirements set forth in section 14.22. If the secretary of state refuses to reinstate the corporation an appeal may be taken under section 14.23.
SOUTH CAROLINA REPORTERS' COMMENTS

This section is essentially identical to the South Carolina Business Corporation Act, Section 33-14-220. Therefore, there has been no change in the law since this Business Corporation Act provision governed nonprofit corporations prior to the adoption of this South Carolina Nonprofit Corporation Act.

Section 33-31-1423. Appeal from denial of reinstatement.

(a) The Secretary of State, upon denying a corporation's application for reinstatement following administrative dissolution, shall serve the corporation by registered or certified mail addressed to its registered agent at its registered office or to the office of the secretary of the corporation at its principal office with a written notice that explains the reason or reasons for denial.

(b) The corporation may appeal the denial of reinstatement to the court of common pleas for Richland County within thirty days after service of the notice of denial is perfected. The corporation appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the Secretary of State's certificate of dissolution, the corporation's application for reinstatement, and the Secretary of State's notice of denial.

(c) The court may summarily order the Secretary of State to reinstate the dissolved corporation or may take other action the court considers appropriate.

(d) The court's final decision may be appealed as in other civil proceedings.
OFFICIAL COMMENT

Section 14.23 allows a corporation that has been administratively dissolved to appeal the secretary of state's denial of reinstatement. States adopting this Model Act should indicate which court will have jurisdiction over the appeal, which party has the burden of proof on appeal, and a standard for judicial review. See Official Comment to Section 1.26.

This section is similar to Section 33-14-230 of the South Carolina Business Corporation Act, but different from the Model Nonprofit Act. This section gives the corporation only thirty days (and not ninety days) within which to file an appeal.

Section 33-31-1430. Grounds for judicial dissolution.

(a) The court of common pleas may dissolve a corporation:

(1) in a proceeding by the Attorney General if it is established that:

(i) the corporation obtained its articles of incorporation through fraud;

(ii) the corporation has continued to exceed or abuse the authority con- ferred upon it by law;

(iii) the corporation is a public benefit
corporation and the assets are being misapplied or wasted;

(iv) the corporation is a public benefit corporation and it is no longer able to carry out its purposes;

(v) the corporation has improperly solicited money or has fraudulently used the money solicited; or

(vi) has carried on, conducted, or transacted its business or affairs in a persistently fraudulent or illegal manner.

The enumeration of these grounds for dissolution, (i) through (vi), shall not exclude actions or special proceedings by the Attorney General or other state official for the dissolution of a corporation for other causes as provided in this chapter or in any other statute of this State.

(2) except as provided in the articles or bylaws of a religious corporation, in a proceeding by fifty members or members holding five percent of the voting power, whichever is less, or by a director or any person specified in the articles, if it is established that:

(i) the directors are deadlocked in the management of the corporate affairs and the members, if any, are unable to break the deadlock;

(ii) the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent, or unfairly prejudicial either to the corporation or to any member, whether in his capacity as a member, director, or officer of the corporation;

(iii) the members are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have, or would otherwise have, expired;

(iv) the corporate assets are being misapplied or wasted; or

(vi) the corporation has abandoned its business and has failed within a reasonable time, to dissolve, to liquidate its affairs, or to distribute its remaining property among its members;

(vii) the corporation's period of duration stated in its articles of incorporation has expired;

(3) in a proceeding by a creditor if it is established that:

(i) the creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or

(ii) the corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent.

(4) in a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

(b) Before dissolving a corporation the court shall consider whether:

(1) there are reasonable alternatives to dissolution;

(2) dissolution is in the public interest, if the corporation is a public benefit corporation; and

(3) dissolution is the best way of protecting the interests of members, if the corporation is a mutual benefit corporation.

The court may order any other form of relief which it deems proper in the circumstances.
OFFICIAL COMMENT

Section 14.30 specifies the people who can seek a court-ordered dissolution and the grounds for dissolution. A court has wide discretion in determining whether dissolution will be granted and may refuse to order dissolution even if it finds that the grounds for dissolution are present. Before ordering dissolution a court must consider the matters set forth in subdivision (b).

1. Involuntary Dissolution by State

Section 14.30 preserves the right of the state to file a proceeding to involuntarily dissolve a corporation. The attorney general has the duty of protecting the public interest. This duty is particularly important in regard to public benefit corporations. The attorney general must determine whether there is unfairness or fraud in regard to the public, whether the corporation is carrying out its legitimate purposes, or whether assets are being diverted to the personal benefit of officers, directors, members, or controlling persons.

Members of mutual benefit corporations are more likely to protect their own interests than members of public benefit corporations. In addition,

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