SC Lawyer, May 2005, #8. Recent amendments to South Carolina corporate, partnership and LLC statutes: welcome foreign corporations!.

• Author: By Susan Lyons Rowe

South Carolina Lawyer

2005.

SC Lawyer, May 2005, #8.

Recent amendments to South Carolina corporate, partnership and LLC statutes: welcome foreign corporations!

South Carolina Lawyer May 2005

Recent amendments to South Carolina corporate, partnership and LLC statutes: welcome foreign corporations!By Susan Lyons RoweThe South Carolina General Assembly recently made several amendments to Title 33 of the South Carolina Code of Laws. With the enactment of Act 221, the South Carolina General Assembly made several important changes to the corporate, partnership and LLC acts in an effort to advance South Carolina as a serious competitor in the attraction and maintenance of business entities. Effective as of April 29, 2004, Act 221 allows domestication of foreign corporations, mergers and conversions by various business entities. There are some minor technical changes cleaning up Title 33. Significant, and sometimes disastrous (e.g., a corporation converting to a limited liability company taxed as a partnership), tax ramifications may result from mergers, conversions and domestication that are beyond the scope of this article. Therefore, consulting a tax advisor before commencing any of these actions is critical.

Domestication

Act 221 allows foreign corporations to domesticate in South Carolina and remain the same entity for all purposes. See S.C. Code Ann. § 33-9-100, et seq. Domestication means that after a foreign corporation files articles of domestication in South Carolina, the corporation is domesticated in this state, and its existence is deemed to have commenced as of the date the corporation commenced its existence in the foreign jurisdiction. Therefore, allowing domestication may encourage foreign corporations to come to South Carolina.

A foreign corporation may become a South Carolina corporation by filing articles of domestication and an initial annual report with the South Carolina Secretary of State. Likewise, the foreign corporation must file articles of dissolution or any other required documents in the foreign jurisdiction within five days of filing South Carolina articles of domestication. S.C. Code Ann. § 33-9-100(A). A majority of the foreign corporation's shareholders entitled to vote must approve the domestication, unless the corporation's bylaws or charter requires a greater vote.

The effects of domesticating in South Carolina are as follows: (1) the corporation is now subject to South Carolina laws and governed by the South Carolina Business Corporation Act; (2) the corporation is deemed to have commenced its existence on the date of incorporation in the foreign jurisdiction; (3) title to real and personal property remains in the corporation without any impairment or reversion; (4) debts, liabilities and other obligations remain with the corporation; (5) pending lawsuits or other actions against the corporation continue; (6) the articles of domestication are the articles of incorporation of the corporation for purposes of South Carolina law; (7) issued and outstanding shares of the corporation remain the same; and (8) all privileges, powers, rights, immunities and purposes of the corporation stay vested in the corporation. Any personal liability of a shareholder that arose before the articles of domestication were filed remains with the shareholder and is subject to a right of contribution from the other shareholders, as governed by the law of the foreign jurisdiction; however, no personal shareholder liability attaches for any obligation arising under the foreign jurisdiction's laws after the articles of domestication are filed in South Carolina. Pursuant to an amendment to Section 33-4-104, the domesticated corporation is required to file notices of name change with the register of deeds in any counties in which real property is owned. The notice may be in the form of a deed to the new corporation or an affidavit containing the old and new names and a property description; alternatively, the entity may file a copy of the articles of domestication along with a property description.

In reviewing Act 221, practitioners may wish to note the following issues. The domestication provisions of Act 221 apply only to foreign corporations and do not permit foreign limited liability companies or foreign limited or general partnerships to domesticate in South Carolina. Act 221 also does not permit South Carolina entities to domesticate out of South Carolina. Furthermore, it is unclear what ramifications may result if the state law of the original jurisdiction of the foreign corporation is inconsistent with the South Carolina domestication provisions.

Mergers

Other amendments provide the procedures for, and legal effects of, mergers between corporations, limited liability companies and general and limited partnerships. While Section 33-44-904 of the LLC act previously permitted limited liability companies to merge into or with domestic or foreign corporations, general or limited partnerships or limited liability companies, before the amendments, there were no corresponding provisions in the corporate code or partnership acts permitting the merger of corporations or general or limited partnerships...