South Carolina General Assembly
108th Session, 1989-1990

Bill 1318


                    Current Status

Bill Number:               1318
Ratification Number:       530
Act Number                 446
Introducing Body:          Senate
Subject:                   Corporate name requirements revised
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(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A446, R530, S1318)

AN ACT TO AMEND SECTION 33-2-102, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO ARTICLES OF INCORPORATION, SO AS TO REVISE WHAT THE ARTICLES MUST SET FORTH; TO AMEND SECTION 33-4-101, RELATING TO CORPORATE NAMES, SO AS TO FURTHER PROVIDE FOR THOSE THINGS FROM WHICH A CORPORATE NAME MUST BE DISTINGUISHABLE AND FOR THE EXCEPTIONS TO THESE CORPORATE NAME REQUIREMENTS; TO AMEND SECTION 33-7-280, RELATING TO VOTING FOR DIRECTORS AND CUMULATIVE VOTING, SO AS TO PROVIDE FOR THE CIRCUMSTANCES WHEN THE ARTICLES OF A CORPORATION MAY NOT BE AMENDED TO REMOVE CUMULATIVE VOTING; TO AMEND SECTION 33-8-310, RELATING TO DIRECTOR OR OFFICER CONFLICTS OF INTEREST, SO AS TO FURTHER PROVIDE FOR THOSE SITUATIONS WHERE A CONFLICT OF INTEREST TRANSACTION IS NOT VOIDABLE BY THE CORPORATION; TO AMEND SECTION 33-15-101, RELATING TO A FOREIGN CORPORATION'S AUTHORITY TO TRANSACT BUSINESS IN THIS STATE, SO AS TO FURTHER PROVIDE FOR THIS AUTHORITY; TO AMEND SECTION 33-15-103, RELATING TO AN APPLICATION BY A FOREIGN CORPORATION FOR A CERTIFICATE OF AUTHORITY TO TRANSACT BUSINESS IN THIS STATE, SO AS TO REVISE WHAT THE APPLICATION MUST SET FORTH; TO AMEND ARTICLE 7, CHAPTER 19 OF TITLE 33, RELATING TO MISCELLANEOUS REGULATORY PROVISIONS, SO AS TO DELETE CERTAIN REQUIREMENTS FOR DOMESTIC AND FOREIGN PROFESSIONAL CORPORATIONS TO DO BUSINESS IN THIS STATE AND TO DELETE THE REQUIREMENT THAT ANNUAL QUALIFICATION STATEMENTS MUST BE FILED; TO AMEND SECTION 33-20-105, RELATING TO SAVINGS PROVISIONS IN THE CORPORATE CODE, SO AS TO FURTHER PROVIDE FOR THESE SAVINGS PROVISIONS; TO AMEND SECTION 35-2-104, RELATING TO THE DEFINITION OF AN "ISSUING PUBLIC CORPORATION" FOR PURPOSES OF CONTROL SHARE ACQUISITION PROVISIONS, SO AS TO REVISE THIS DEFINITION; TO AMEND SECTION 35-2-213, RELATING TO THE DEFINITION OF "RESIDENT DOMESTIC CORPORATION" FOR PURPOSES OF BUSINESS COMBINATION PROVISIONS, SO AS TO REVISE THIS DEFINITION; AND TO AMEND SECTION 35-2-224, RELATING TO THE APPLICABILITY OF BUSINESS COMBINATION PROVISIONS TO FOREIGN CORPORATIONS, SO AS TO FURTHER PROVIDE FOR THIS APPLICABILITY.

Be it enacted by the General Assembly of the State of South Carolina:

Requirements of articles revised

SECTION 1. Section 33-2-102(a)(6) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(6) a certificate, signed by an attorney licensed to practice in this State, that all of the requirements of this section have been complied with."

Corporate name requirements revised

SECTION 2. Section 33-4-101(b) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(b) Except as authorized by subsections (c) and (d), a corporate name must be distinguishable upon the records of the Secretary of State from:

(1) the corporate name of a corporation incorporated or authorized to transact business in this State;

(2) a corporate name reserved or registered under Section 33-4-102 or 33-4-103;

(3) the fictitious name adopted by a foreign corporation authorized to transact business in this State because its real name is unavailable;

(4) the corporate name of a not-for-profit corporation incorporated or authorized to transact business in this State;

(5) the name of a limited partnership authorized to transact business in this State."

Exemptions from corporate name requirements revised

SECTION 3. Section 33-4-101(f) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(f) The following corporations are exempt from subsection (a)(1):

(1) a bank, building and loan association, savings and loan association, insurance company, public utility, and railroad;

(2) a corporation which was organized before January 1, 1964, and whose charter or articles of incorporation on the effective date of this Business Corporation Act of 1988 specified a corporate name that would not meet the requirements of subsection (a) of this section, may continue to use that name as its official name;

(3) nonprofit corporation; and

(4) a professional corporation governed by Chapter 19 of this title, but the name of the professional corporation must comply with Section 33-19-150."

Reporters' comments revised

SECTION 4. Item (3) of the South Carolina Reporters' Comments to Section 33-4-101 of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(3) Exemptions from the requirement that 'Inc.' or a similar designation be included as part of the official corporate name.

Subsection (f)(1) carries forward the provision in Section 33-5-10(b) of the 1981 act, originally enacted as part of the 1962 act, that exempts banks, savings institutions, insurance companies, public utilities, and railroads from the requirement that their official corporate name include the term 'corporation,' 'incorporated,' 'company,' or 'limited' or an abbreviation of one of these terms. Moreover, many industrial and mercantile corporations formed before the 1962 act had no such term in their official corporate name. The 1962 act exempted these corporations from the name designation requirement. This exemption was carried forward in the 1981 act and has been continued in this act in subsection (f)(2).

Subsection (f)(3) makes it clear that nonprofit corporations do not have to use the designation 'corporation' and the like in their official corporate name. See Section 33-20-103. Hospitals, educational institutions, and the like traditionally have not used such designations, and there are no compelling public policy reasons why they should be required to do so.

Subsection (f)(4) exempts professional corporations from the designations required in subsection (a), but requires professional corporations to include in the articles of incorporation one of the special designations in Section 33-19-150 as part of their official corporate name.

The exemptions in subsection (f) are only with respect to the requirement in subsection (a)(1). Corporations qualifying for one of the exemptions must nevertheless meet all the remaining requirements in this section, e.g., subsection (b) which requires that the name of a corporation be distinguishable from the name of all other corporations and limited partnerships on file in the office of the South Carolina Secretary of State."

Director's conflict of interest

SECTION 5. Section 33-8-310(a)(1) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(1) the material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors, and the board of directors or a committee authorized, approved, or ratified the transaction;".

Contents of application for certificate of authority to transact business revised

SECTION 6. Section 33-15-103(a)(8) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(8) a certificate, signed by an attorney licensed to practice in this State, that, in the opinion of the attorney, all of the requirements of this section relating to the application for authorization of foreign corporations to do business in this State have been complied with."

Regulatory provisions revised

SECTION 7. Article 7, Chapter 19, Title 33 of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"Article 7

Miscellaneous Regulatory Provisions

Section 33-19-600. The annual report required by Section 33-16-220 for each domestic professional corporation and for each foreign professional corporation authorized to transact business in this State must include a statement that all of its shareholders, not less than one-half of its directors, and all of its officers other than its secretary and treasurer, if any, are qualified persons with respect to the corporation.

Section 33-19-610. Each licensing authority is empowered to promulgate rules expressly authorized by this chapter if the rules are consistent with the public interest or required by the public health or welfare or by generally recognized standards of professional conduct.

Section 33-19-620. This chapter does not restrict the jurisdiction of a licensing authority over individuals rendering a professional service within the jurisdiction of the licensing authority nor does it affect the interpretation or application of any law pertaining to standards of professional conduct.

Section 33-19-630. (a) A person commits an offense if he signs a document he knows is false in any material respect with intent that the document be delivered to the licensing authority for filing.

(b) An offense under this section is a misdemeanor punishable by a fine of not to exceed five hundred dollars.

(c) The offense created by this section is in addition to any other offense created by law for the same conduct."

Savings provisions revised

SECTION 8. Section 33-20-105(a)(4) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed."

Definition revised

'

SECTION 9. Section 35-2-104(a) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(a) As used in this article, 'issuing public corporation' means a domestic corporation that has either:

(1) a class of voting shares registered with the Securities and Exchange Commission or another federal agency under Section 12 of the 1934 Exchange Act; and

(2) its principal place of business, its principal office, or substantial assets within South Carolina; and either:

(A) more than ten percent of its shareholders resident in South Carolina;

(B) more than ten percent of its shares owned by South Carolina residents; or

(C) ten thousand shareholders resident in South Carolina."

Definition revised

SECTION 10. Section 35-2-213(a) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(a) As used in this article, 'resident domestic corporation' means a domestic corporation that has a class of voting shares registered with the Securities and Exchange Commission or another federal agency under Section 12 of the 1934 Exchange Act."

Applicability of business combination provisions revised

SECTION 11. Section 35-2-224(a) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(a) The provisions of this article also apply to a foreign corporation incorporated in any state other than South Carolina that has:

(1) a class of voting shares registered with the Securities and Exchange Commission or another federal agency under Section 12 of the 1934 Exchange Act; and

(2) its principal place of business, its principal office, or more than forty percent of its assets within South Carolina; and either:

(A) more than ten percent of its shareholders resident in South Carolina;

(B) more than ten percent of its shares owned by South Carolina residents; or

(C) ten thousand shareholders resident in South Carolina."

Cumulative voting

SECTION 12. Section 33-7-280 of the 1976 Code, as added by Act 444 of 1988, is amended by adding a new subsection (d) to read:

"(d) The articles of a corporation may not be amended to remove cumulative voting if the votes cast against the amendment would be sufficient to elect a director to the board of directors if cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of a director of any class of directors."

Foreign corporation's authority to transact business revised

SECTION 13. Section 33-15-101(b) of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(b) The following activities, among others, do not constitute transacting business within the meaning of subsection (a):

(1) maintaining, defending, or settling any proceeding;

(2) holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;

(3) maintaining bank accounts;

(4) maintaining offices or agencies for the transfer, exchange, and registration of the corporation's own securities or maintaining trustees or depositories with respect to those securities;

(5) selling through independent contractors;

(6) soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this State before they become contracts;

(7) creating or acquiring any indebtedness, mortgages, and security interests in real or personal property;

(8) securing or collecting any debts or enforcing mortgages, security interests, or any other rights in property securing debts;

(9) owning, without more, real or personal property;

(10) conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature;

(11) transacting business in interstate commerce; or

(12) owning and controlling a subsidiary corporation incorporated in or transacting business within this State."

Reporters' comments revised

SECTION 14. Item (4) of the South Carolina Reporters' Comments to Section 33-15-101 of the 1976 Code, as added by Act 444 of 1988, is amended to read:

"(4) Nonmodel Act Provisions

Since 1962, a foreign parent has not been required to qualify merely because it owned a South Carolina subsidiary. The Official Comments to the Model Act suggest that this activity should be exempt. Therefore, for clarification, the prior South Carolina provision has been retained as new subsection (b)(12). This provision was originally derived from the provisions of Cal. Corporate Code Section 6301. See LaVarre v. International Paper Company 37 F. 2d 141 (E.D.S.C. 1929).

Likewise, the mere leasing of South Carolina real property from a nonqualified corporation to its South Carolina subsidiary does not require the parent to qualify to do business in South Carolina since the general rule is that the mere holding and leasing of property by a foreign corporation is an isolated incident and not the conduct of business, unless the corporation is in the business generally of buying and leasing real property. Further, the parent and subsidiary are treated as separate entities unless it would appear proper to 'pierce the corporate veil'. 1977 Op. S.C. Att'y Gen., 233, (#77-305).

Subsection (8) of the Official Text of Model Act Section 15.01 dealing with enforcing mortgages and loans has been slightly broadened in keeping with prior South Carolina law (Section 35-23-10(b)(6) of the 1981 South Carolina Business Corporation Act). Subsection (8) permits out-of-state lenders to enforce not only mortgages and security interests but also 'any rights' in the property.

The first sentence of Official Comment #6 to Section 33-15-101 does not reflect the interpretation intended to be given to Section 33-15-101(b)(7). South Carolina has for years employed model act language to designate that the creation of indebtedness, mortgages and security interests, without more, does not constitute transacting business. Different from the first sentence of Official Comment #6, the current language, and the predecessor phraseology (which essentially was identical wording) is not limited to only those foreign corporations which are not in the business of making loans. A foreign corporate lender which is in the business of making loans, but which only conducts those activities listed in Section 33-15-101(b)(7), e.g., does not also have an office in South Carolina or employees within the State, is not deemed to be doing business in South Carolina. See, 1966 Op. S.C. Att'y Gen. 27 (#1977).

However, the purchase of mortgage notes and mortgages by an out-of-state bank or mortgage pool has historically not been viewed as the transaction of business in South Carolina. This is true even though the out-of-state mortgage buyer might be required to pursue foreclosure actions and might be required to take possession of the properties and rent them pending their sale in foreclosure. See 1964 Op. S.C. Att'y Gen. 119 (#1674)."

Time effective

SECTION 15. This act takes effect upon approval by the Governor.

Approved the 7th day of May, 1990.