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House of Representatives Journal 2/22/2016 02:00 PM

JOURNAL OF THE HOUSE

NINETY-FIRST SESSION




TWENTY-FIFTH DAY




STATE OF SOUTH DAKOTA
House of Representatives, Pierre
Monday, February 22, 2016

    The House convened at 2:00 p.m., pursuant to adjournment, the Speaker presiding.

    The prayer was offered by the Chaplain, Pastor J.P. Mosley, Jr., followed by the Pledge of Allegiance led by House pages Kayla Bailly and Wyatt Beyer.

    Roll Call: All members present except Reps. Kaiser and Verchio who were excused.

APPROVAL OF THE JOURNAL

MR. SPEAKER:

    The Committee on Legislative Procedure respectfully reports that the Chief Clerk of the House has had under consideration the House Journal of the twenty-fourth day.

    All errors, typographical or otherwise, are duly marked in the temporary journal for correction.

    And we hereby move the adoption of the report.

Respectfully submitted,
Dean Wink, Chair

    Which motion prevailed.
    The oath of office was administered by Speaker Wink to the following named pages:

    Kayla Bailly, Wyatt Beyer, Levi Czmowski, Layna Darling, Cameron Decker, Andrew Flannery, Jacob Huber, Madison Jones, Hannah Kilker, Shaun Maher, Luke Mairose, Joseph Miller, Staci Seaman, Ashley Van Meeteren.

    Which was subscribed to and placed on file in the office of the Secretary of State.

REPORTS OF STANDING COMMITTEES


MR. SPEAKER:

    The Joint Committee on Appropriations respectfully reports that it has had under consideration HB 1130 which was tabled.

Respectfully submitted,
Justin R. Cronin, Co-Chair

Also MR. SPEAKER:

    The Committee on Commerce and Energy respectfully reports that it has had under consideration SB 38 and returns the same with the recommendation that said bill do pass and be placed on the consent calendar.

Also MR. SPEAKER:

    The Committee on Commerce and Energy respectfully reports that it has had under consideration HB 1242 and returns the same with the recommendation that said bill be amended as follows:

1242ya

    On page 1 of the printed bill, delete lines 13 and 14.

    On page 2, delete lines 1 to 11, inclusive.

    And that as so amended said bill do pass.


Also MR. SPEAKER:

    The Committee on Commerce and Energy respectfully reports that it has had under consideration HB 1246 which was tabled.

Respectfully submitted,
Tim Rounds, Chair

Also MR. SPEAKER:

    The Committee on State Affairs respectfully reports that it has had under consideration HB 1143, 1144, and 1145 and HJR 1002 and returns the same with the recommendation that said bills and resolution do pass.

Also MR. SPEAKER:

    The Committee on State Affairs respectfully reports that it has had under consideration HB 1234 and returns the same with the recommendation that said bill be amended as follows:

1234ra

    On page 1, line 7, of the printed bill, after "regarding" insert "expanded programs or expanded".

    On page 1, line 8, after "entitlements" insert "requiring an expenditure of funds equal to or greater than five percent of the Department of Social Services and Department of Human Services combined total Medicaid expenditures for the most recently completed fiscal year".

1234ota

    On page 1, line 2, of the printed bill, delete "any" and insert "certain".

    And that as so amended said bill do pass.

Also MR. SPEAKER:

    The Committee on State Affairs respectfully reports that it has had under consideration HCR 1014 and returns the same with the recommendation that said resolution be adopted.

Also MR. SPEAKER:

    The Committee on State Affairs respectfully reports that it has had under consideration HB 1241 and 1247 which were tabled.



Also MR. SPEAKER:

    The Committee on State Affairs respectfully reports that it has had under consideration HJR 1001 which was deferred to the 41st Legislative Day.

Respectfully submitted,
Brian G. Gosch, Chair

Also MR. SPEAKER:

    The Committee on Judiciary respectfully reports that it has had under consideration HB 1139 and returns the same with the recommendation that said bill do pass and be placed on the consent calendar.

Also MR. SPEAKER:

    The Committee on Judiciary respectfully reports that it has had under consideration HB 1068 and returns the same with the recommendation that said bill be amended as follows:

1068ra

    On the printed bill, delete everything after the enacting clause and insert:

"    Section 1. That the code be amended by adding a NEW SECTION to read:

    This chapter shall be known and may be cited as the South Dakota Revised Model Nonprofit Corporations Act.

    Section 2. That the code be amended by adding a NEW SECTION to read:

    The Office of the Secretary of State shall accept for filing any document satisfying the following requirements, and the requirements of any other section of this Act that adds to or varies these requirements:

            (1)    The document is required or permitted to be filed in the Office of the Secretary of State;

            (2)    The document contains the information required by this Act;

            (3)    The document is typewritten or printed or, if electronically transmitted, is in a format that can be retrieved or reproduced in typewritten or printed form;

            (4)    The document is in the English language. A nonprofit corporate name need not be in English if written in English letters or in English letters in combination with Arabic or Roman numerals. The certificate of existence required of foreign corporations

need not be in English if accompanied by a reasonably authenticated English translation;

            (5)    The document is executed by one of the following persons:

            (i)    By the chair of the board of directors of a domestic or foreign nonprofit corporation, by its president, or by another of its officers;

            (ii)    If directors have not been selected or the nonprofit corporation has not been formed, by an incorporator; or

            (iii)    If the nonprofit corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that receiver, trustee, or court-appointed fiduciary;

            (6)    The person executing the document has signed it and has stated beneath or opposite the signature the person's name and the capacity in which the person signs. The document may, but need not, contain a corporate seal, attestation, acknowledgment, or verification;

            (7)    If the Office of the Secretary of State prescribes a mandatory form for the document under section 3 of this Act, the document is in or on the prescribed form;

            (8)    The document is delivered to the Office of the Secretary of State for filing. Delivery may be made by electronic transmission if and to the extent permitted by the Office of the Secretary of State. If the document is filed in typewritten or printed form and not transmitted electronically, the Office of the Secretary of State may require one exact or conformed copy to be delivered with the document; and

            (9)    When the document is delivered to the Office of the Secretary of State for filing, the correct filing fee, and any license fee, or penalty required to be paid at that time by sections 2 to 20, inclusive, of this Act, or other law is paid or provision for payment made in a manner permitted by the Office of the Secretary of State.

    Section 3. That the code be amended by adding a NEW SECTION to read:

    The Office of the Secretary of State may prescribe and furnish, on request, forms for:

            (1)    An application for a certificate of existence;

            (2)    A foreign nonprofit corporation's application for a certificate of authority to conduct activities in this state;

            (3)    A foreign nonprofit corporation's application for a certificate of withdrawal; and

            (4)    The annual report.

    The Office of the Secretary of State may require the use of the forms described in this section. The Office of the Secretary of State may prescribe and furnish, on request, forms for other documents required or permitted to be filed by this Act but the use of such forms is not mandatory.

    Section 4. That the code be amended by adding a NEW SECTION to read:

    (a) The Office of the Secretary of State shall collect the following fees when the documents described in this section are delivered for filing:

            (1)    Articles of incorporation for nonprofit, $75;

            (2)    Application for use of indistinguishable name, $10;

            (3)    Application for reserved name, $25;

            (4)    Notice of transfer of reserved name, $15;

            (5)    Application for registered name, $25;

            (6)    Application for renewal of registered name, $15. A renewal application may be filed between the first day of October and the thirty-first day of December in each year and shall extend the registration for the following year;

            (7)    Articles of domestication, $30;

            (8)    Articles of charter surrender, $30;

            (9)    Articles of domestication and conversion, $30;

            (10)    Articles of entity conversion, $30;

            (11)    Amendment of articles of incorporation, $30;

            (12)    Restatement of articles of incorporation, $15;

            (13)    Articles of merger or membership exchange, $30;

            (14)    Articles of dissolution, $5;

            (15)    Articles of revocation of dissolution, $5;

            (16)    Certificate of administrative dissolution, no charge;

            (17)    Application for reinstatement following administrative dissolution, plus any delinquent annual report filing fees for the period prior to the reinstatement application, $50 plus fees;

            (18)    Certificate of reinstatement, no charge;

            (19)    Certificate of judicial dissolution, no charge;

            (20)    Application for certificate of authority, $125;

            (21)    Application for amended certificate of authority, $30;

            (22)    Application for certificate of withdrawal, $5;

            (23)    Application for transfer of authority, $10;

            (24)    Certificate of revocation of authority to conduct activities, no charge;

            (25)    Annual report, $25;

            (26)    Articles of correction, $15;

            (27)    Application for certificate of existence or authorization, $20;

            (28)    Any other document required or permitted to be filed by this chapter, $10.

    (b) The Office of the Secretary of State shall collect a fee of thirty dollars each time process is served on the Office of the Secretary of State under sections 2 to 20, inclusive, of this Act. The party to a proceeding causing service of process is entitled to recover this fee as costs if the party prevails in the proceeding.

    (c) The Office of the Secretary of State shall collect the following fees for copying and certifying the copy of any filed document relating to a domestic or foreign corporation:

            (1)    Two dollars a page for copying;

            (2)    Twenty dollars for copying microfiche archived documents for a single nonprofit corporation; and

            (3)    Fifteen dollars for the certificate of certification.

    Section 5. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in paragraph (b) and section 6 of this Act, a document accepted for filing is effective:

            (1)    At the date and time of filing, as evidenced by such means as the Office of the Secretary of State may use for the purpose of recording the date and time of filing; or

            (2)    At the time specified in the document as its effective time on the date it is filed.

    (b) A document may specify a delayed effective time and date, and if it does so the document becomes effective at the time and date specified. If a delayed effective date is indicated, but no time is specified, the document is effective at the close of business on that date. A delayed effective date for a document may not be later than the ninetieth day after the date it is filed.

    Section 6. That the code be amended by adding a NEW SECTION to read:

    (a) A domestic or foreign corporation may correct a document filed by the Office of the Secretary of State if any of the following occur:

            (1)    The document contains an inaccuracy;

            (2)    The document was defectively executed, attested, sealed, verified, or acknowledged; or

            (3)    The electronic transmission was defective.

    (b) A document is corrected:

            (1)    By preparing articles of correction that:

            (i)    Describe the document, including its filing date, or attach a copy of it to the articles;

            (ii)    Specify the inaccuracy or defect to be corrected; and

            (iii)    Correct the inaccuracy or defect; and

            (2)    By delivering the articles to the Office of the Secretary of State for filing.

    (c) Articles of correction are effective on the effective date of the document that they correct except as to persons relying on the uncorrected document and adversely affected by the correction. As to those persons, articles of correction are effective when filed.

    Section 7. That the code be amended by adding a NEW SECTION to read:

    If a document delivered to the Office of the Secretary of State for filing satisfies the requirements of section 2 of this Act, the Office of the Secretary of State shall file it. The Office of the Secretary of State files a document by recording it as filed on the date and time of receipt. After filing a document, the Office of the Secretary of State shall deliver to the domestic or foreign nonprofit corporation or its representative a receipt with an acknowledgment of the date and time of filing.

    If the Office of the Secretary of State refuses to file a document, the Office of the Secretary of State shall return it to the domestic or foreign nonprofit corporation or its representative within five days after the document is delivered, together with a brief, written explanation of the reason for the refusal.

    The Office of the Secretary of State's duty to file documents under this section is ministerial. The Office of the Secretary of State's filing or refusing to file a document does not:

            (1)    Affect the validity or invalidity of the document in whole or part;

            (2)    Relate to the correctness or incorrectness of information contained in the document; or

            (3)    Create a presumption that the document is valid or invalid or that information contained in the document is correct or incorrect.

    Section 8. That the code be amended by adding a NEW SECTION to read:

    If the Office of the Secretary of State refuses to file a document delivered to the Office of the Secretary of State for filing, the domestic or foreign nonprofit corporation may appeal the refusal within thirty days after the return of the document to the circuit court of the county where the corporation's principal office is located in this state or, if none in this state, to the circuit court of Hughes County. The appeal is commenced by petitioning the court to compel filing the document and by attaching to the petition the document and the Office of the Secretary of State's explanation of the refusal to file.

    The court may summarily order the Office of the Secretary of State to file the document or take other action the court considers appropriate. The court's final decision may be appealed as in other civil proceedings.

    Section 9. That the code be amended by adding a NEW SECTION to read:

    Any certificate from the Office of the Secretary of State delivered with a copy of a document filed by the Office of the Secretary of State, is conclusive evidence that the original document is on file with the Office of the Secretary of State.

    Section 10. That the code be amended by adding a NEW SECTION to read:

    Any person may apply to the Office of the Secretary of State to furnish a certificate of existence for a domestic nonprofit corporation or a certificate of authorization for a foreign nonprofit corporation. A certificate of existence or authorization shall set forth:

            (1)    The domestic nonprofit corporation's corporate name or the foreign nonprofit corporation's corporate name used in this state;

            (2)    That the domestic nonprofit corporation is duly incorporated under the law of this state, the date of its incorporation, and the period of its duration if less than perpetual; or that the foreign nonprofit corporation is authorized to conduct activities in this state;

            (3)    That all fees, taxes, and penalties owed to this state have been paid, if:

            (i)    Payment is reflected in the records of the Office of the Secretary of State; and

            (ii)    Nonpayment affects the existence or authorization of the domestic or foreign nonprofit corporation;

            (4)    That its most recent annual report has been delivered to the Office of the Secretary of State;

            (5)    That articles of dissolution have not been filed; and

            (6)    Other facts of record in the Office of the Secretary of State that may be requested by the applicant.

    Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Office of the Secretary of State may be relied upon as conclusive evidence that the domestic or foreign nonprofit corporation is in existence or is authorized to conduct activities in this state.

    Section 11. That the code be amended by adding a NEW SECTION to read:

    No person may sign a document, paper form or electronically, knowing it is false in any material respect with intent that the document be delivered to the Office of the Secretary of State for filing. An offense under this section is subject to an administrative penalty assessed by the Office of the Secretary of State in any amount not exceeding five hundred dollars.

    Section 12. That the code be amended by adding a NEW SECTION to read:

    The Office of the Secretary of State has the power and authority reasonably necessary to perform the duties required of Office of the Secretary of State by this Act.

    Section 13. That the code be amended by adding a NEW SECTION to read:

    Terms used in this Act mean:

            (1)    "Articles" or "articles of incorporation," the original articles of incorporation or articles of organization, all amendments thereof, and any other record filed with the Office of the Secretary of State with respect to a domestic nonprofit corporation under any provision of this Act. If any record filed under this Act restates the articles in their entirety, thenceforth the articles may not include any prior filings;

            (2)    "Board" or "board of directors," the group of individuals responsible for the management of the activities and affairs of the nonprofit corporation, regardless of the name used to refer to the group. The term includes a designated body to the extent:

            (i)    The powers, functions, or authority of the board are vested in, or are exercised by, the designated body; and

            (ii)    The provision of this Act in which the term appears is relevant to the discharge by the designated body of its powers, functions, or authority;

            (3)    "Business corporation" or "domestic business corporation," a corporation incorporated or limited liability company organized under the laws of this state and subject to the provisions of the business corporation act or limited liability company act;

            (4)    "Bylaws," the code or codes of rules, other than the articles of incorporation, adopted for the regulation and governance of the internal affairs of the nonprofit corporation, regardless of the name used to refer to those rules;

            (5)    "Charitable corporation," a domestic nonprofit corporation that is operated primarily or exclusively for one or more charitable purposes;

            (6)    "Charitable purpose," a purpose that:

            (i)    Would make a corporation operated exclusively for that purpose eligible to be exempt from taxation under section 501(c)(3) or (4) of the Internal Revenue Code; or

            (ii)    Is considered charitable under law other than this Act or the Internal Revenue Code;

            (7)    "Corporation," "domestic corporation," "domestic nonprofit corporation," or "nonprofit corporation," a corporation incorporated or limited liability company organized pursuant to or subject to the provisions of this Act that is not a foreign corporation;

            (8)    "Delegate," a person elected or appointed to vote in a representative assembly for the election of directors or on other matters;

            (9)    "Deliver" or "delivery," any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and electronic transmission, except that delivery to the Office of the Secretary of State means actual receipt by the Office of the Secretary of State;

            (10)    "Designated body," a person or group, other than a committee of the board of directors, that is vested by the articles of incorporation or bylaws with powers that, if not vested by the articles or bylaws in that person or group, would be required by this Act to be exercised by the board or the members;

            (11)    "Director," an individual designated, elected, or appointed, by that or any other name or title, to act as a member of the board of directors, while the individual is holding that position. The term does not include a member of a designated body, as such;

            (12)    "Domestic unincorporated entity," an unincorporated entity whose internal affairs are governed by the laws of this state;

            (13)    "Effective date of notice," as provided pursuant to section 14 of this Act;

            (14)    "Electronic," relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities;

            (15)    "Eligible entity," a domestic or foreign unincorporated entity or a domestic or foreign business corporation or limited liability company;

            (16)    "Eligible interests," interests, units, or shares;

            (17)    "Employee," does not include an individual serving as an officer or director who is not otherwise employed by the corporation;

            (18)    "Entitled to vote," entitled to vote on the matter under consideration pursuant to the articles of incorporation or bylaws of the nonprofit corporation or any applicable controlling provision of law;

            (19)    "Entity," includes a domestic or foreign business corporation or limited liability company, domestic or foreign nonprofit corporation, domestic or foreign unincorporated entity, estate, trust, state, the United States, foreign government, or governmental subdivision;

            (20)    "Filing entity," an unincorporated entity that is created by filing a public organic record;

            (21)    "Foreign business corporation," a corporation for profit incorporated under a law other than the laws of this state that would be a business corporation if incorporated under the laws of this state;

            (22)    "Foreign corporation" or "foreign nonprofit corporation," a corporation incorporated pursuant to a law other than the laws of this state that would be a nonprofit corporation if incorporated under the laws of this state;

            (23)    "Foreign unincorporated entity," an unincorporated entity whose internal affairs are governed by an organic law of a jurisdiction other than this state;

            (24)    "Fundamental transaction," an amendment of the articles of incorporation or bylaws, merger, membership exchange, sale of all or substantially all of the assets, domestication, conversion, or dissolution of a nonprofit corporation;

            (25)    "Governmental subdivision," includes any county, municipality, township, school district, chartered governmental unit, or other special districts;

            (26)    "Governor," a person by or under whose authority the powers of an unincorporated entity are exercised and under whose direction the business, activities, or affairs of the entity are managed pursuant to the organic law and organic records of the entity;

            (27)    "Includes," denotes a partial definition;

            (28)    "Individual," a natural person;

            (29)    "Interest," either or both of the following rights under the organic law of an unincorporated entity:

            (i)    The right to receive distributions from the entity either in the ordinary course or upon liquidation; or

            (ii)    The right to receive notice or vote on issues involving its internal affairs, other than as an agent, assignee, proxy, or person responsible for managing its business, activities, or affairs;

            (30)    "Interest holder," a person who holds of record an interest;

            (31)    "Interest holder liability," personal liability for a debt, obligation, or liability of a domestic or foreign business or nonprofit corporation or unincorporated entity that is imposed on a person:

            (i)    Solely by reason of the person's status as a shareholder, interest holder, or member; or

            (ii)    By the articles of incorporation, bylaws, or an organic record pursuant to a provision of the organic law authorizing the articles, bylaws, or an organic record to make one or more specified shareholders, interest holders, or members liable in their capacity as shareholders, interest holders, or members for all or specified debts, obligations, or liabilities of the entity;

            (32)    "Internal Revenue Code," the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as amended;

            (33)    "Material interest," an actual or potential benefit or detriment, other than one that would devolve on the nonprofit corporation or the members generally, that would reasonably be expected to impair the objectivity of an individual's judgment when participating in the action to be taken;

            (34)    "Material relationship," a familial, financial, professional, employment, or other relationship that would reasonably be expected to impair the objectivity of an individual's judgment when participating in the action to be taken;

            (35)    "Means," denotes an exhaustive definition;

            (36)    "Member,":

            (i)    A person who has the right, in accordance with the articles of incorporation or bylaws and not as a delegate, to select or vote for the election of directors or delegates, to vote on any type of fundamental transaction, or to exercise the other rights or powers as are reserved to the member in accordance with the provisions of the articles of incorporation or bylaws. See section 36 of this Act;

            (ii)    A designated body to the extent:

            (A)    The powers, functions, or authority of the members are vested in, or are exercised by, the designated body; and

            (B)    The provision of this Act in which the term appears is relevant to the discharge by the designated body of its powers, functions, or authority;

            (37)    "Membership," the rights and any obligations of a member in a nonprofit corporation;

            (38)    "Membership corporation," a nonprofit corporation whose articles of incorporation or bylaws provide that it shall have one or more members;

            (39)    "Nonfiling entity," an unincorporated entity that is not created by filing a public organic record;

            (40)    "Nonmembership corporation," a nonprofit corporation whose articles of incorporation or bylaws do not provide that it shall have members;

            (41)    "Nonqualified foreign corporation," a foreign corporation that is not authorized to conduct activities in this state;

            (42)    "Notice," as provided for in section 14 of this Act;

            (43)    "Officer," includes:

            (i)    A person who is an officer pursuant to section 93 of this Act; and

            (ii)    If a nonprofit corporation is in the hands of a custodian, receiver, trustee, or other court-appointed fiduciary, that fiduciary or any person appointed by that fiduciary to act as an officer for any purpose under this Act;

            (44)    "Organic law," the statute principally governing the internal affairs of a domestic or foreign business or nonprofit corporation or unincorporated entity;

            (45)    "Organic record," a public organic record or the private organic rules;

            (46)    "Person," includes an individual or an entity;

            (47)    "Principal office," the office, in or out of this state, designated in the annual report as the location of the principal executive office of a domestic or foreign nonprofit corporation;

            (48)    "Private organic rules," any record, other than the public organic record, if any, that determines the internal governance of an unincorporated entity. Where the private organic rules have been amended or restated, the term means the private organic rules as last amended or restated;

            (49)    "Proceeding," includes civil suit and criminal, administrative, and investigatory action;

            (50)    "Public organic record," the record, if any, that is filed of public record to create an unincorporated entity. Where a public organic record has been amended or restated, the term means the public organic record as last amended or restated;

            (51)    "Qualified foreign corporation," a foreign corporation authorized to conduct activities in this state;

            (52)    "Record," information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;

            (53)    "Record date," the date established pursuant to section 58 of this Act on which a nonprofit corporation determines the identity of its members and the membership interests they hold for purposes of this Act. The determinations shall be made as of the close of business on the record date unless another time for doing so is specified when the record date is fixed;

            (54)    "Secretary," the corporate officer to whom the articles of incorporation, bylaws, or board of directors delegates responsibility pursuant to section 93(b) of this Act for custody of the minutes of the meetings of the board of directors, any designated body, committees, and the members, and for authenticating records of the nonprofit corporation;

            (55)    "Shareholder," the person in whose name shares or units are registered in the records of a domestic or foreign business corporation, limited liability company, or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with such a corporation;

            (56)    "Shares," the units into which the proprietary interests in a domestic or foreign business corporation or limited liability company are divided;

            (57)    "Sign," with present intent to authenticate or adopt a record:

            (i)    To execute or adopt a tangible symbol; or

            (ii)    To attach to or logically associate with the record an electronic sound, symbol, or process;

            (58)    "State," when referring to a part of the United States, includes a state or commonwealth, the District of Columbia, the Commonwealth of Puerto Rico, a territory or insular possession of the United States, and any agency or governmental subdivision of any of the foregoing;

            (59)    "Unincorporated entity," an organization or artificial legal person that either has a separate legal existence or has the power to acquire an estate in real property in its own name and that is not any of the following: a domestic or foreign business,

limited liability company, or nonprofit corporation, an estate, a trust, a governmental subdivision, a state, the United States, or a foreign government. The term includes a general partnership, limited partnership, business or statutory trust, joint stock association, and unincorporated nonprofit association;

            (60)    "United States," includes a district, authority, bureau, commission, department, and any other agency of the United States;

            (61)    "Vote," "voting," or "casting a vote," includes the giving of consent in the form of a record without a meeting. The term does not include either recording the fact of abstention or failing to vote for a candidate or for approval or disapproval of a matter, whether or not the person entitled to vote characterizes such conduct as voting or casting a vote;

            (62)    "Voting group," one or more classes of members that pursuant to the articles of incorporation, bylaws, or this Act are entitled to vote and be counted together collectively on a matter at a meeting of members. All members entitled by the articles of incorporation, bylaws, or this Act to vote generally on the matter are for that purpose a single voting group;

            (63)    "Voting power," the current power to vote in the election of directors or delegates, or to vote on approval of any type of fundamental transaction or other matter in accordance with the provisions of the articles of incorporation or bylaws.

    Section 14. That the code be amended by adding a NEW SECTION to read:

    (a) Notice under this Act must be in the form of a record unless oral notice is authorized by this Act or is reasonable under the circumstances.

    (b) Notice may be communicated in person or by delivery. If these forms of communication are impracticable, notice may be communicated by a newspaper of general circulation in the area where published, or by radio, television, or other form of public broadcast communication.

    (c) Notice by a corporation to a director, member of a designated body, or member shall be given to the mailing or electronic address of the person shown in the records of the corporation or as provided in subdivision (e)(1) or (e)(2).

    (d) Notice to a domestic or qualified foreign nonprofit corporation may be delivered to its registered agent at its registered office or to the corporation or its secretary at its principal office shown in its most recent annual report or, in the case of a foreign corporation that has not yet delivered an annual report, in its application for a certificate of authority.

    (e) Notice is effective at the earliest of the following:

            (1)    When received;

            (2)    When left at the recipient's residence or usual place of business;

            (3)    Five days after its deposit in the United States mail or with a commercial delivery service, if the postage or delivery charge is paid and the notice is correctly addressed;

            (4)    On the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, or by commercial delivery service.

    (f) Oral notice is effective when communicated, if communicated in a comprehensible manner.

    (g) If this Act prescribes notice requirements for particular circumstances, those requirements govern. If bylaws prescribe notice requirements, not inconsistent with this section or other provisions of this Act, those requirements govern.

    (h) With respect to electronic communications:

            (1)    Unless otherwise provided in the articles of incorporation or bylaws, or otherwise agreed between the sender and the recipient, an electronic communication is received when:

            (i)    It enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record; and

            (ii)    It is in a form capable of being processed by that system;

            (2)    An electronic communication is received under subdivision (h)(1) even if no individual is aware of its receipt;

            (3)    Receipt of an electronic acknowledgement from an information processing system described in subdivision (h)(1) establishes that a record was received but, by itself, does not establish that the content sent corresponds to the content received.

    Section 15. That the code be amended by adding a NEW SECTION to read:

    (a) For purposes of sections 15 to 18, inclusive, of this Act, a corporate action applies to and is:

            (1)    The election, appointment, designation or other selection and the suspension, removal or expulsion of members, delegates, directors, members of a designated body, or officers of a nonprofit corporation;

            (2)    The taking of any action on any matter that is required pursuant to this Act or under any other provision of law to be, or which under the articles of incorporation or bylaws may be, submitted for action to the members, delegates, directors, members of a designated body, or officers of a nonprofit corporation.

    (b) For purposes of sections 15 to 18, inclusive, of this Act, court is the circuit court of the county where the corporation's principal office or, if none in this state, its registered office is located.

    Section 16. That the code be amended by adding a NEW SECTION to read:

    (a) Where under applicable law or the articles of incorporation or bylaws of a nonprofit corporation there has been a failure to hold an annual meeting if an annual meeting was not held within the earlier of six months after the end of the corporation's fiscal year or fifteen months after its last annual meeting; or there has been a failure to take corporate action and the failure has continued for thirty days after the date designated or appropriate therefor, the court may summarily order a meeting to be held upon the application of the attorney general in the case of a charitable corporation or any person entitled, either alone or in conjunction with other persons similarly seeking relief under this section, to call a meeting to consider the corporate action in issue.

    (b) The court may determine the right to vote at the meeting of persons claiming that right, may appoint an individual to hold the meeting under such orders and powers as the court may deem proper, and may take such action as may be required to give due notice of the meeting and convene and conduct the meeting in the interests of justice.

    Section 17. That the code be amended by adding a NEW SECTION to read:

    (a) Upon petition of a person whose status as, or whose rights or duties as, a member, delegate, director, member of a designated body, or officer of a corporation are or may be affected by any corporate action, the court may hear and determine the validity of the corporate action.

    (b) The court may make such orders in any such case as may be just and proper, with power to enforce the production of any books, papers and records of the corporation and other evidence that may relate to the issue. The court shall provide for notice of the pendency of the proceedings under this section to all persons affected thereby. If the court determines that no valid corporate action has been taken, the court may order a meeting to be held in accordance with section 16 of this Act.

    (c) Paragraph (a) does not apply if a nonprofit corporation has provided in its articles of incorporation or bylaws for a means of resolving a challenge to a corporate action, but the court may enforce the articles or bylaws if appropriate.

    Section 18. That the code be amended by adding a NEW SECTION to read:

    The plaintiff in a proceeding pursuant to sections 15 to 18, inclusive, of this Act must notify the attorney general within ten days after commencing the proceeding if it involves a charitable corporation.

    Section 19. That the code be amended by adding a NEW SECTION to read:


    If religious doctrine or canon law governing the affairs of a nonprofit corporation is inconsistent with the provisions of this Act on the same subject, the religious doctrine or canon law shall control to the extent required by the Constitution of the United States or the Constitution of South Dakota or both.

    Section 20. That the code be amended by adding a NEW SECTION to read:

    (a) The attorney general must be given notice of the commencement of any proceeding that this Act authorizes the attorney general to bring but that has been commenced by another person.

    (b) Whenever any provision of this Act requires that notice be given to the attorney general before or after commencing a proceeding or permits the attorney general to commence a proceeding:

            (1)    If no proceeding has been commenced, the attorney general may take appropriate action including, but not limited to, seeking injunctive relief; and

            (2)    If a proceeding has been commenced by a person other than the attorney general, the attorney general, as of right, may intervene in such proceeding.

    Section 21. That the code be amended by adding a NEW SECTION to read:

    One or more persons may act as the incorporators of a nonprofit corporation by delivering articles of incorporation to the Office of the Secretary of State for filing.

    Section 22. That the code be amended by adding a NEW SECTION to read:

    (a) The articles of incorporation must set forth:

            (1)    A name for the nonprofit corporation that satisfies the requirements of section 32 of this Act;

            (2)    The purpose or purposes for which the nonprofit corporation is organized;

            (3)    The street address of the corporation's initial registered office and the name of its initial registered agent at that office;

            (4)    That the corporation is incorporated under this Act;

            (5)    The name and address of each incorporator;

            (6)    If the corporation is to have no members, a statement to that effect;

            (7)    If the corporation is to have one or more classes of members, any provision which the incorporators elect to set forth in the articles of incorporation designating the class or classes of members and stating the qualifications and rights of the members of each class; and

            (8)    If the directors or any of them are not to be elected or appointed by one or more classes of members, a statement of the manner in which such directors shall be elected or appointed.

    (b) The articles of incorporation may set forth:

            (1)    The names of the individuals who are to serve as the initial directors;

            (2)    Provisions creating one or more designated bodies;

            (3)    The names of the initial members of a designated body;

            (4)    The names of the initial members, if any;

            (5)    Provisions not inconsistent with law regarding:

            (i)    Managing the business and regulating the affairs of the corporation;

            (ii)    Defining, limiting, and regulating the powers of the corporation, its board of directors, any designated body, and the members, if any;

            (iii)    The characteristics, qualifications, rights, limitations, and obligations attaching to each or any class of members; or

            (iv)    The distribution of assets on dissolution;

            (6)    Any provision that this Act requires or permits to be set forth in the articles or bylaws;

            (7)    A provision permitting or making obligatory indemnification of a director for liability, as defined in sections 106 and 107 of this Act, to any person for any action taken, or any failure to take any action, as a director, except liability for:

            (i)    Receipt of a financial benefit to which the director is not entitled;

            (ii)    An intentional infliction of harm;

            (iii)    A violation of section 90 of this Act; or

            (iv)    An intentional violation of criminal law; and

            (8)    Provisions required if the corporation is to be exempt from taxation under federal, state, or local law.

    (c) The liability of a director of a nonprofit corporation may be eliminated or limited by a provision of the articles of incorporation that a director is not liable to the corporation or its

members for money damages for any action taken, or any failure to take any action, as a director, except liability for:

            (1)    The amount of a financial benefit received by the director to which the director is not entitled;

            (2)    An intentional infliction of harm;

            (3)    A violation of section 90 of this Act; or

            (4)    An intentional violation of criminal law.

    (d) The articles of incorporation need not set forth any of the corporate powers enumerated in this Act.

    (e) See sections 28(a) purposes, 90 standards of liability for directors, and 113 variation of indemnification.

    Section 23. That the code be amended by adding a NEW SECTION to read:

    (a) Unless a delayed effective date is specified, the corporate existence begins when the articles of incorporation are filed.

    (b) The filing of the articles of incorporation by the Office of the Secretary of State is conclusive proof that the incorporators satisfied all conditions precedent to incorporation except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the nonprofit corporation.

    Section 24. That the code be amended by adding a NEW SECTION to read:

    Each nonprofit corporation authorized to conduct activities in this state must continuously maintain in this state:

            (1)    A registered office that may be the same as any of its places of business; and

            (2)    A registered agent pursuant to chapter 59-11.

    Section 25. That the code be amended by adding a NEW SECTION to read:

    All persons purporting to act as or on behalf of a nonprofit corporation, knowing there was no incorporation under this Act, are jointly and severally liable for all liabilities created while so acting.

    Section 26. That the code be amended by adding a NEW SECTION to read:

    (a) After incorporation:

            (1)    If initial directors or members of a designated body are named in the articles of incorporation, those persons must hold an organizational meeting, as appropriate, at the call of a majority of them, to complete the organization of the nonprofit corporation by electing directors, when the organization of the corporation is to be completed by a designated body, appointing officers, adopting bylaws, and carrying on any other business brought before the meeting;

            (2)    If initial directors or members of a designated body are not named in the articles, the incorporator or incorporators must hold an organizational meeting at the call of a majority of the incorporators:

            (i)    To elect directors and complete the organization of the nonprofit corporation; or

            (ii)    To elect a board of directors who shall complete the organization of the corporation.

    (b) Action required or permitted by this Act to be taken by incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more consents in the form of a record describing the action taken and signed by each incorporator.

    (c) An organizational meeting may be held in or out of this state.

    Section 27. That the code be amended by adding a NEW SECTION to read:

    (a) The incorporators or the board of directors of a nonprofit corporation shall adopt initial bylaws for the corporation.

    (b) The bylaws of a nonprofit corporation may contain any provision for managing the activities and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

    Section 28. That the code be amended by adding a NEW SECTION to read:

    (a) Every nonprofit corporation has the purpose of engaging in any lawful activity unless a more limited purpose is set forth in the articles of incorporation.

    (b) A corporation engaging in an activity that is subject to regulation pursuant to another statute of this state may incorporate pursuant to this Act only if incorporating pursuant to this Act is not prohibited by the other statute. The corporation is subject to all the limitations of the other statute.

    Section 29. That the code be amended by adding a NEW SECTION to read:

    Unless its articles of incorporation provide otherwise, every nonprofit corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its affairs including, without limitation, power:

            (1)    To sue and be sued, complain, and defend in its corporate name;

            (2)    To have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing it or in any other manner reproducing it;

            (3)    To make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for managing and regulating the affairs of the corporation;

            (4)    To purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with, real or personal property, or any legal or equitable interest in property, wherever located;

            (5)    To sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;

            (6)    To purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and deal in and with shares or other interests in, or obligations of, any other entity;

            (7)    To make contracts and guarantees, incur liabilities, borrow money, issue notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of any of its property or income;

            (8)    To lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment, except as limited by section 92 of this Act;

            (9)    To be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;

            (10)    To conduct its activities, locate offices, and exercise the powers granted by this Act within or without this state;

            (11)    To elect directors and appoint officers, employees, and agents of the corporation, define their duties, fix their compensation, and lend them money and credit except as limited by section 92 of this Act;

            (12)    To pay pensions and establish pension plans, pension trusts, and benefit or incentive plans for any or all of its current or former directors, officers, employees, and agents;

            (13)    To make donations for charitable purposes;

            (14)    To impose dues, assessments, admission, and transfer fees on its members;

            (15)    To establish conditions for admission of members, admit members, and issue memberships;

            (16)    To carry on a business; and

            (17)    To make payments or donations, or do any other act, not inconsistent with law, that furthers the purposes, activities, and affairs of the corporation.

    Section 30. That the code be amended by adding a NEW SECTION to read:

    (a) In anticipation of or during an emergency, the board of directors of a nonprofit corporation may:

            (1)    Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and

            (2)    Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.

    (b) During an emergency, unless the articles of incorporation or bylaws provide otherwise:

            (1)    Notice of a meeting of the board of directors need be given only to those directors it is practicable to reach and may be given in any practicable manner; and

            (2)    One or more officers of the nonprofit corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority.

    (c) Corporate action taken in good faith during an emergency to further the ordinary affairs of the nonprofit corporation:

            (1)    Binds the corporation; and

            (2)    May not be used to impose liability on a director, officer, employee, or agent.

    (d) An emergency exists for purposes of this section if a quorum of the directors cannot readily be assembled because of some catastrophic event.

    Section 31. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in paragraph (b), the validity of corporate action may not be challenged on the ground that the nonprofit corporation lacks or lacked power to act.

    (b) The power of a nonprofit corporation to act may be challenged:

            (1)    In a derivative proceeding pursuant to sections 167 to 175, inclusive, of this Act, by a member, director, or member of a designated body against the corporation to enjoin the act;

            (2)    In a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director or member of a designated body, officer, employee, or agent of the corporation; or

            (3)    In a proceeding by the attorney general.

    (c) In a proceeding by a member, director, or member of a designated body under subdivision (b)(1) to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profit, suffered by the corporation or another party because of enjoining the unauthorized act.

    Section 32. That the code be amended by adding a NEW SECTION to read:

    (a) The name of a nonprofit corporation may not contain language stating or implying that the corporation is organized for a purpose other than that permitted by section 28 and its articles of incorporation.

    (b) Except as authorized by paragraph (c) or (d), the name of a nonprofit corporation must be distinguishable upon the records of the Office of the Secretary of State from:

            (1)    The name of a nonprofit or business corporation incorporated or authorized to conduct activities or transact business in this state;

            (2)    The name of a filing entity organized under the laws of this state or authorized to transact business in this state;

            (3)    A name reserved or registered under section 33 or 34 of this Act;

            (4)    The fictitious name adopted by a foreign nonprofit or business corporation or filing entity authorized to conduct activities or transact business in this state because its real name is unavailable;

            (5)    A name of any other corporation or limited liability company, whether for profit or not for profit, organized under the laws of this state; or the name of any foreign entity, whether for profit or not for profit, authorized to engage in any business in this state; or any corporate name reserved or required to be registered with the Office of the Secretary of State, or the name of any limited partnership certified or registered in this state; and

            (6)    A fictitious name registered pursuant to § 37-11-1.

    (c) A nonprofit corporation may apply for authorization to use a name that is not distinguishable upon the records of the Office of the Secretary of State from one or more of the names described in paragraph (b). The Office of the Secretary of State shall permit use of the name applied for if:

            (1)    The other entity consents to the use in writing and submits an undertaking in form satisfactory to the Office of the Secretary of State to change its name to a name that is distinguishable upon the records of the Office of the Secretary of State from the name of the applying corporation; or

            (2)    The applicant delivers to the Office of the Secretary of State a certified copy of a final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this state.

    (d) A nonprofit corporation may use a name that is otherwise unavailable pursuant to paragraph (b) if the nonprofit corporation wishing to use the name:

            (1)    Has merged with the other entity;

            (2)    Has been formed by reorganization of the other entity; or

            (3)    Has acquired all or substantially all of the assets, including the name, of the other entity.

    (e) A name is distinguishable upon the records of the Office of the Secretary of State only if the name differs from every other name of record in a way other than:

            (1)    Use of punctuation marks;

            (2)    Use of a definite or indefinite article; and

            (3)    Use of any of the following terms, or an abbreviation thereof, in any language to designate the status of an entity: corporation, company, incorporated, limited, association, fund, syndicate, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, trust, statutory trust, or business trust.

    (f) This Act does not control the use of fictitious names.

    Section 33. That the code be amended by adding a NEW SECTION to read:

    A person may reserve the exclusive use of a nonprofit corporate name, including a fictitious name for a foreign nonprofit corporation whose nonprofit corporate name is not available, by delivering an application to the Office of the Secretary of State for filing. The application shall set forth the name and address of the applicant and the name proposed to be reserved. If the Office of the Secretary of State finds that the nonprofit corporate name applied for is available, the Office of the Secretary of State shall reserve the name for the applicant's exclusive use for a nonrenewable one-hundred-twenty-day period.

    The owner of a reserved nonprofit corporate name may transfer the reservation to another person by delivering to the Office of the Secretary of State a signed notice of the transfer that states the name and address of the transferee.

    Section 34. That the code be amended by adding a NEW SECTION to read:

    A nonqualified foreign nonprofit corporation may register its corporate name, or its corporate name with any addition required by sections 199 and 200 of this Act, if the name is distinguishable upon the records of the Office of the Secretary of State from the nonprofit

corporate names that are not available under section 32 of this Act. A nonqualified foreign nonprofit corporation registers corporate name, or its corporate name with any addition required by sections 199 and 200 of this Act, by delivering to the Office of the Secretary of State for filing an application:

            (1)    Setting forth its corporate name, or its corporate name with any addition required by sections 199 and 200 of this Act, the state or country and date of its incorporation, and a brief description of the nature of the activities in which it is engaged; and

            (2)    Accompanied by a certificate of existence, or a document of similar import, from the state or country of incorporation.

The name is registered for the applicant's exclusive use upon the effective date of the application.

    Section 35. That the code be amended by adding a NEW SECTION to read:

    (a) A nonprofit corporation is not required to have members.

    (b) Where the articles of incorporation or bylaws of a nonprofit corporation do not provide that it shall have members, or where a corporation has in fact no members entitled to vote on a matter, any provision of this Act or any other provision of law requiring notice to, the presence of, or the vote, consent, or other action by members of the corporation in connection with the matter is satisfied by notice to, the presence of, or the vote, consent, or other action by the board of directors or a designated body of the corporation.

    Section 36. That the code be amended by adding a NEW SECTION to read:

    (a) The articles of incorporation or bylaws of a membership corporation may establish criteria or procedures for admission of members.

    (b) A person may not be admitted as a member without the person's consent.

    (c) If a membership corporation provides certificates of membership to the members, the certificates may not be registered or transferable except as provided in the articles of incorporation or bylaws.

    (d) A person is not a member of a nonprofit corporation unless the person meets the definition of a member in section 13 of this Act, regardless of whether the corporation designates or refers to the person as a member.

    Section 37. That the code be amended by adding a NEW SECTION to read:

    Except as provided in its articles of incorporation or bylaws, a membership corporation may admit members for no consideration or for such consideration as is determined by the board of directors. The consideration may take any form, including promissory notes, intangible property, or past or future services. Payment of the consideration may be made at such times and upon

such terms as are set forth in or authorized by the articles of incorporation, bylaws, or a resolution of the board.

    Section 38. That the code be amended by adding a NEW SECTION to read:

    (a) Except as otherwise provided in the articles of incorporation or bylaws, each member of a membership corporation has the same rights and obligations as every other member with respect to voting, dissolution, membership transfer, and other matters.

    (b) See section 153(a) of this Act, bylaw amendments requiring member approval.

    Section 39. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in the articles of incorporation or bylaws, a member of a membership corporation may not transfer a membership or any right arising therefrom.

    (b) Where the right to transfer a membership has been provided, a restriction on that right is not binding with respect to a member holding a membership issued prior to the adoption of the restriction unless the restriction is approved by the affected member.

    Section 40. That the code be amended by adding a NEW SECTION to read:

    A member of a membership corporation is not, as such, personally liable for the acts, debts, liabilities, or obligations of the corporation.

    Section 41. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation may levy dues, assessments, and fees on its members to the extent authorized in the articles of incorporation or bylaws. Dues, assessments, and fees may be imposed on all members, or to the members of a single class, or to members of different classes in different amounts or proportions. A member of a class may be made exempt from dues, assessments, and fees to the extent provided in the articles or bylaws.

    (b) The amount and method of collection of dues, assessments, and fees may be fixed in the articles of incorporation or bylaws, or the articles or bylaws may authorize the board of directors or members to fix the amount and method of collection.

    (c) The articles of incorporation or bylaws may provide reasonable means, such as termination and reinstatement of membership, to enforce the collection of dues, assessments, and fees.

    Section 42. That the code be amended by adding a NEW SECTION to read:

    (a) A proceeding may not be brought by a creditor of a membership corporation to reach the liability, if any, of a member to the corporation unless final judgment has been rendered in favor of the creditor against the corporation and execution has been returned unsatisfied in whole or in part or unless the proceeding would be useless.

    (b) All creditors of a membership corporation, with or without reducing their claims to judgment, may intervene in any creditor's proceeding brought pursuant to paragraph (a) to reach and apply unpaid amounts due the corporation. Any or all members who owe amounts to the corporation may be joined in the proceeding.

    Section 43. That the code be amended by adding a NEW SECTION to read:

    (a) A member of a membership corporation may resign at any time.

    (b) The resignation of a member does not relieve the member from any obligations incurred or commitments made prior to resignation.

    Section 44. That the code be amended by adding a NEW SECTION to read:

    (a) A membership in a membership corporation may be terminated or suspended for the reasons and in the manner provided in the articles of incorporation or bylaws.

    (b) A proceeding challenging a termination or suspension for any reason must be commenced within one year after the effective date of the termination or suspension.

    (c) The termination or suspension of a member does not relieve the member from any obligations incurred or commitments made prior to the termination or suspension.

    (d) See section 153(a) of this Act, bylaw amendments requiring member approval.

    Section 45. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in the articles of incorporation or bylaws, a membership corporation that is not a charitable corporation may not purchase any of its memberships or any right arising therefrom.

    (b) See section 153(a) of this Act, bylaw amendments requiring member approval.

    Section 46. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation may provide in its articles of incorporation or bylaws for delegates.

    (b) The articles of incorporation or bylaws may set forth provisions relating to:

            (1)    The characteristics, qualifications, rights, limitations, and obligations of delegates including their selection and removal;

            (2)    Calling, noticing, holding, and conducting meetings of delegates; and

            (3)    Carrying on corporate activities during and between meetings of delegates.

    (c) An assembly or other organized group of delegates constitutes a designated body.

    Section 47. That the code be amended by adding a NEW SECTION to read:

    (a) Except as permitted by section 45 or 48 of this Act, no nonprofit corporation may pay dividends or make distributions of any part of its assets, income, or profits to its members, directors, members of a designated body, or officers.

    (b) This section does not apply to a contract or transaction authorized pursuant to section 114 of this Act.

    Section 48. That the code be amended by adding a NEW SECTION to read:

    (a) A nonprofit corporation may pay reasonable compensation or reimburse reasonable expenses to members, directors, members of a designated body, or officers for services rendered.

    (b) A nonprofit corporation may confer benefits upon or make contributions to members or nonmembers in conformity with its purposes, repurchase its memberships only to the extent provided in section 45 of this Act, or repay capital contributions, except when:

            (1)    The corporation is currently insolvent or would thereby be made insolvent or rendered unable to carry on its purposes; or

            (2)    The fair value of the assets of the corporation remaining after the conferring of benefits, contribution, repurchase, or repayment would be insufficient to meet its liabilities.

    (c) A nonprofit corporation may make distributions of cash or property to members upon dissolution or final liquidation only as permitted pursuant to this Act.

    Section 49. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation that is not a charitable corporation may provide in its articles of incorporation or bylaws that members, upon or subsequent to admission, must make capital contributions. Except as provided in the articles or bylaws, the amount shall be fixed by the board of directors. The requirement of a capital contribution may apply to all members, or to the members of a single class, or to members of different classes in different amounts or proportions.

    (b) The adoption or amendment of a capital contribution requirement, whether or not approved by the members, does not apply to a member who did not vote in favor of the adoption or amendment until thirty days after the member has been given notice of the adoption or amendment.

    Section 50. That the code be amended by adding a NEW SECTION to read:

    (a) No nonprofit corporation may issue bonds or other evidences of indebtedness except for money or other property, tangible or intangible, or labor or services actually received by or performed for the corporation or for its benefit or in its formation or reorganization, or a

combination thereof. In the absence of fraud, the judgment of the board of directors or the members as to the value of the consideration received by the corporation is conclusive.

    (b) The board of directors or the members may authorize a mortgage or pledge of, or the creation of a security interest in, all or any part of the property of the nonprofit corporation, or any interest therein. Unless otherwise required in the articles of incorporation or bylaws, the vote or consent of the members may not be required to make effective such action by the board.

    Section 51. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in paragraph (b), a nonprofit corporation that is a private foundation as defined in section 509(a) of the Internal Revenue Code shall:

            (1)    Distribute such amounts for each taxable year at such time and in such manner as not to subject the corporation to tax under section 4942 of the Internal Revenue Code;

            (2)    Not engage in any act of self-dealing as defined in section 4941(d) of the Internal Revenue Code;

            (3)    Not retain any excess business holdings as defined in section 4943(c) of the Internal Revenue Code;

            (4)    Not make any investments in such manner as to subject the corporation to tax under section 4944 of the Internal Revenue Code; and

            (5)    Not make any taxable expenditure as defined in section 4945(d) of the Internal Revenue Code.

    (b) Paragraph (a) does not apply to a nonprofit corporation incorporated before January 1, 1970, that has been properly relieved from the requirements of section 508(e)(1) of the Internal Revenue Code by a timely judicial proceeding.

    Section 52. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation shall hold a meeting of members annually at a time stated in or fixed in accordance with the articles of incorporation or bylaws.

    (b) A membership corporation may hold regular meetings on a regional or other basis at times stated in or fixed in accordance with the articles of incorporation or bylaws.

    (c) Except as provided in paragraph (e), annual and regular meetings of the members may be held in or out of this state at the place stated in or fixed in accordance with the articles of incorporation or bylaws. If no place is stated in or fixed in accordance with the articles or bylaws, annual and regular meetings shall be held at the nonprofit corporation's principal office.

    (d) The failure to hold an annual or regular meeting at the time stated in or fixed in accordance with the articles of incorporation or bylaws does not affect the validity of any corporate action.

    (e) The articles of incorporation or bylaws may provide that an annual or regular meeting of members does not need to be held at a geographic location if the meeting is held by means of the internet or other electronic communications technology in a fashion pursuant to which the members have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the members, pose questions, and make comments.

    Section 53. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation shall hold a special meeting of members:

            (1)    At the call of its board of directors or the persons authorized to do so by the articles of incorporation or bylaws; or

            (2)    If the holders of at least five percent, or such other amount up to twenty-five percent as the articles of incorporation or bylaws specifies, of all the votes entitled to be cast on an issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation one or more demands in the form of a record for the meeting describing the purpose for which it is to be held.

    (b) Unless otherwise provided in the articles of incorporation or bylaws, a demand for a special meeting may be revoked by notice to that effect received by the membership corporation from the members calling the meeting prior to the receipt by the corporation of demands sufficient in number to require the holding of a special meeting.

    (c) If not otherwise fixed pursuant to section 54 or 58 of this Act, the record date for determining members entitled to demand a special meeting is the date the first member signs a demand.

    (d) Except as provided in paragraph (f), special meetings of the members may be held in or out of this state at the place stated in or fixed in accordance with the articles of incorporation or bylaws. If no place is stated or fixed in accordance with the articles or bylaws, special meetings shall be held at the corporation's principal office.

    (e) Only business within the purpose or purposes described in the meeting notice required pursuant to section 56(c) of this Act may be conducted at a special meeting of the members.

    (f) The articles of incorporation or bylaws may provide that a special meeting of members does not need to be held at a geographic location if the meeting is held by means of the internet or other electronic communications technology in a fashion pursuant to which the members have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the members, pose questions, and make comments.

    Section 54. That the code be amended by adding a NEW SECTION to read:

    (a) The circuit court of the county where the principal office of a membership corporation, if not in this state, its registered office, is located may summarily order a meeting to be held:

            (1)    On application of any member entitled to participate in an annual or regular meeting if an annual meeting was not held within the earlier of six months after the end of the corporation's fiscal year or fifteen months after its last annual meeting; or

            (2)    On application of a member who signed a demand for a special meeting pursuant to section 53 of this Act, if:

            (i)    Notice of the special meeting was not given within thirty days after the date the demand was delivered to the corporation's secretary; or

            (ii)    The special meeting was not held in accordance with the notice.

    (b) The court may fix the time and place of the meeting, determine the members entitled to participate in the meeting, specify a record date for determining members entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting, or direct that the votes represented at the meeting constitute a quorum for action on those matters, and enter other orders necessary to accomplish the purpose or purposes of the meeting.

    Section 55. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in the articles of incorporation or bylaws, action required or permitted pursuant to this Act to be taken at a meeting of the members may be taken without a meeting if the action is taken by all the members entitled to vote on the action. The action must be evidenced by one or more consents in the form of a record bearing the date of signature and describing the action taken, signed by all the members entitled to vote on the action, and delivered to the membership corporation for inclusion in the minutes or filing with the corporate records.

    (b) If not otherwise fixed pursuant to section 54 or 58 of this Act, the record date for determining members entitled to take action without a meeting is the date the first member signs the consent under paragraph (a). A consent is not effective to take the corporate action referred to therein unless, within sixty days after the earliest date appearing on a consent delivered to the membership corporation in the manner required pursuant to this section, consents signed by members entitled to cast the required number of votes on the action are received by the corporation. A consent may be revoked by a signed notice in the form of a record to that effect received by the corporation prior to receipt by the corporation of unrevoked consents sufficient in number to take corporate action.

    (c) A consent signed pursuant to this section has the effect of a meeting vote and may be described as such.

    (d) If the articles of incorporation, or the bylaws require that notice of proposed corporate action be given to members not entitled to vote on the action and the action is to be taken by consent of the members entitled to vote, the membership corporation must deliver to the members not entitled to vote notice of the proposed action at least ten days before the action is taken. The notice must contain or be accompanied by the same material that would have been

required to be delivered to members not entitled to vote in a notice of meeting at which the proposed action would have been submitted to the members for action.

    Section 56. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation must give notice to the members of the date, time, and place of each annual, regular, or special meeting of the members. Except as provided in the articles of incorporation or the bylaws:

            (1)    The notice must be given no fewer than ten nor more than sixty days before the meeting date; and

            (2)    The corporation must give notice only to members entitled to vote at the meeting.

    (b) Unless this Act, the articles of incorporation, or the bylaws require otherwise, notice of an annual meeting need not include a description of the purpose for which the meeting is called.

    (c) Notice of a special meeting must include a description of the purpose for which the meeting is called.

    (d) If not otherwise fixed pursuant to section 54 or 58 of this Act, the record date for determining members entitled to notice of and to vote at an annual or special meeting of the members is the day before the first notice is given to members.

    (e) Unless the articles of incorporation or bylaws require otherwise, if an annual, regular, or special meeting of the members is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed pursuant to section 58 of this Act, notice of the adjourned meeting must be given pursuant to this section to the members entitled to vote on the new record date.

    Section 57. That the code be amended by adding a NEW SECTION to read:

    (a) A member may waive any notice required pursuant to this Act, the articles of incorporation, or the bylaws before or after the date and time stated in the notice or of the meeting or action. The waiver must be in the form of a record, be signed by the member entitled to the notice, and be delivered to the membership corporation for inclusion in the minutes or filing with the corporate records.

    (b) The attendance of a member at a meeting:

            (1)    Waives objection to lack of notice or defective notice of the meeting, unless the member at the beginning of the meeting objects to holding the meeting or transacting business at the meeting;

            (2)    Waives objection to consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the member objects at the meeting to considering the matter.

    Section 58. That the code be amended by adding a NEW SECTION to read:

    (a) The articles of incorporation or bylaws may fix or provide the manner of fixing the record date to determine the members entitled to notice of a meeting of the members, to demand a special meeting, to vote, or to take any other action. If the articles or bylaws do not fix or provide for fixing a record date, the board of directors of the membership corporation may fix a future date as the record date. A membership corporation comprised of a single member is not required to fix a record date.

    (b) A record date fixed under this section may not be more than seventy days before the meeting or action requiring a determination of members.

    (c) A determination of members entitled to notice of or to vote at a meeting of the members is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty days after the date fixed for the original meeting.

    (d) If a court orders a meeting adjourned to a date more than one hundred twenty days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.

    Section 59. That the code be amended by adding a NEW SECTION to read:

    (a) At each meeting of members, an individual must preside as chair. The chair shall be appointed:

            (1)    As provided in the articles of incorporation or bylaws;

            (2)    In the absence of a provision in the articles or bylaws, by the board of directors; or

            (3)    In the absence of both a provision in the articles or bylaws and an appointment by the board, by the members at the meeting.

    (b) Except as provided in the articles of incorporation or bylaws, the chair shall determine the order of business and shall have the authority to establish rules for the conduct of the meeting.

    (c) Any rules adopted for, and the conduct of, the meeting shall be fair to the members.

    (d) The chair of the meeting shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes, nor any otherwise permissible revocations or changes thereto may be accepted.

    Section 60. That the code be amended by adding a NEW SECTION to read:


    (a) Unless otherwise provided in the articles of incorporation or bylaws, any action that may be taken at any annual, regular, or special meeting of members may be taken without a meeting if the membership corporation delivers a ballot to every member entitled to vote on the matter.

    (b) A ballot must:

            (1)    Be in the form of a record;

            (2)    Set forth each proposed action;

            (3)    Provide an opportunity to vote for, or withhold a vote for, each candidate for election as a director; and

            (4)    Provide an opportunity to vote for or against each other proposed action.

    (c) Approval by ballot pursuant to this section of action other than election of directors is valid only when the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.

    (d) All solicitations for votes by ballot must:

            (1)    Indicate the number of responses needed to meet the quorum requirements;

            (2)    State the percentage of approvals necessary to approve each matter other than election of directors; and

            (3)    Specify the time by which a ballot must be received by the membership corporation in order to be counted.

    (e) Except as otherwise provided in the articles of incorporation or bylaws, a ballot may not be revoked.

    Section 61. That the code be amended by adding a NEW SECTION to read:

    (a) After fixing a record date for a meeting, a membership corporation shall prepare a list of the names of all its members who are entitled to notice of that meeting of the members. The list must show the address of and number of votes each member is entitled to cast at the meeting. A membership corporation comprised of a single member is not required to prepare a membership list.

    (b) The list of members must be available for inspection by any member, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the membership corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A member or the member's agent is entitled on demand in the form of a record to inspect and, subject to the requirements of

section 210(c) of this Act, to copy the list, during regular business hours and at the member's expense, during the period it is available for inspection.

    (c) The membership corporation must make the list of members available at the meeting, and a member or the member's agent is entitled to inspect the list at any time during the meeting or any adjournment.

    (d) If a membership corporation refuses to allow a member or the member's agent to inspect the list of members before or at the meeting, or copy the list as permitted by paragraph (b), the circuit court of the county where the corporation's principal office or, if none in this state, its registered office, is located, on application of the member, may:

            (1)    Summarily order the inspection or copying at the corporation's expense;

            (2)    Postpone the meeting for which the list was prepared until the inspection or copying is complete;

            (3)    Order the corporation to pay the member's costs, including reasonable counsel fees, incurred to obtain the order; and

            (4)    Order other appropriate relief.

    (e) Refusal or failure to prepare or make available the list of members does not affect the validity of action taken at the meeting.

    (f) Instead of making the list of members available as provided in paragraph (b), a membership corporation may state in a notice of meeting that the corporation has elected to proceed pursuant to this paragraph. A member of a corporation that elects to proceed pursuant to this paragraph must state in the member's demand for inspection a proper purpose for which inspection is demanded. Within ten business days after receiving a demand pursuant to this paragraph, the corporation must deliver to the member making the demand an offer of a reasonable alternative method of achieving the purpose identified in the demand without providing access to or a copy of the list of members. An alternative method that reasonably and in a timely manner accomplishes the proper purpose set forth in the demand relieves the corporation from making the list of members available pursuant to paragraph (b), unless within a reasonable time after acceptance of the offer the corporation fails to do the things it offered to do. Any rejection of the corporation's offer must be in the form of a record and must indicate the reasons the alternative proposed by the corporation does not meet the proper purpose of the demand.

    Section 62. That the code be amended by adding a NEW SECTION to read:

    Except as provided in the articles of incorporation or bylaws, each member is entitled to one vote on each matter voted on by the members.

    Section 63. That the code be amended by adding a NEW SECTION to read:


    (a) Except as otherwise provided in the articles of incorporation or bylaws, a member may vote in person or by proxy.

    (b) A member or the member's agent or attorney-in-fact may appoint a proxy to vote or otherwise act for the member by signing an appointment form in the form of a record. An appointment form must contain or be accompanied by information from which it can be determined that the member or the member's agent or attorney-in-fact authorized the appointment of the proxy.

    (c) An appointment of a proxy is effective when a signed appointment in the form of a record is received by the inspectors of election, the officer or agent of the membership corporation authorized to tabulate votes, or the secretary. An appointment is valid for eleven months unless a longer period, which may not exceed three years, is expressly provided in the appointment form.

    (d) The death or incapacity of the member appointing a proxy does not affect the right of the membership corporation to accept the proxy's authority unless notice of the death or incapacity is received by the inspectors of election, the officer or agent authorized to tabulate votes, or the secretary before the proxy exercises his authority under the appointment.

    (e) Subject to section 64 of this Act and to any express limitation on the proxy's authority stated in the appointment form, a membership corporation is entitled to accept the proxy's vote or other action as that of the member making the appointment.

    Section 64. That the code be amended by adding a NEW SECTION to read:

    (a) If the name signed on a ballot, consent, waiver, or proxy appointment corresponds to the name of a member, the membership corporation if acting in good faith is entitled to accept the ballot, consent, waiver, or proxy appointment and give it effect as the act of the member.

    (b) If the name signed on a ballot, consent, waiver, or proxy appointment does not correspond to the name of its member, the membership corporation if acting in good faith is nevertheless entitled to accept the ballot, consent, waiver, or proxy appointment and give it effect as the act of the member if:

            (1)    The member is an entity and the name signed purports to be that of an officer or agent of the entity;

            (2)    The name signed purports to be that of an administrator, executor, guardian, or conservator representing the member and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the ballot, consent, waiver, or proxy appointment;

            (3)    The name signed purports to be that of a receiver or trustee in bankruptcy of the member and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the ballot, consent, waiver, or proxy appointment;

            (4)    The name signed purports to be that of a beneficial owner or attorney-in-fact of the member and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the member has been presented with respect to the ballot, consent, waiver, or proxy appointment;

            (5)    Two or more persons are the member as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.

    (c) The membership corporation is entitled to reject a ballot, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the member.

    (d) The membership corporation and its officer or agent who accepts or rejects a ballot, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section or section 63(b) of this Act are not liable in damages to the member for the consequences of the acceptance or rejection.

    (e) Corporate action based on the acceptance or rejection of a ballot, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

    Section 65. That the code be amended by adding a NEW SECTION to read:

    (a) Members entitled to vote as a separate voting group may take action on a matter at a meeting only if one-tenth of the members exist with respect to that matter. Except as provided in the articles of incorporation or bylaws, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

    (b) Once a member is represented for any purpose at a meeting, the member is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

    (c) If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or bylaws require a greater number of affirmative votes.

    (d) An amendment of the articles of incorporation or bylaws adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in paragraph (a) or (c) is governed by section 67 of this Act.

    (e) If a meeting cannot be organized because a quorum is not present, those members present may adjourn the meeting to such time and place as they may determine. Except as provided in the articles of incorporation or bylaws, when a meeting that has been adjourned for lack of a quorum is reconvened, those members present, although less than a quorum as fixed in this section, the articles, or the bylaws, nonetheless constitute a quorum.

    (f) The election of directors is governed by 68 of this Act.

    Section 66. That the code be amended by adding a NEW SECTION to read:

    (a) If this Act, the articles of incorporation, or the bylaws provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group pursuant to section 65 of this Act.

    (b) If this Act, the articles of incorporation, or the bylaws provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in section 65 of this Act.

    Section 67. That the code be amended by adding a NEW SECTION to read:

    (a) The articles of incorporation or bylaws may provide for a higher or lower quorum or voting requirement for members, or voting groups of members, than is provided for by this Act.

    (b) An amendment to the articles of incorporation or bylaws that adds, changes, or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect.

    Section 68. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in the articles of incorporation or bylaws, directors of a membership corporation are elected by a plurality of the votes cast by the members entitled to vote in the election at a meeting at which a quorum is present.

    (b) Members do not have a right to cumulate their votes for directors.

    Section 69. That the code be amended by adding a NEW SECTION to read:

    (a) A membership corporation may appoint one or more inspectors to act at a meeting of members and make a report in the form of a record of the inspectors' determinations. Each inspector shall execute the duties of inspector impartially and according to the best of the inspector's ability.

    (b) The inspectors shall:

            (1)    Ascertain the number of members and their voting power;

            (2)    Determine the members present at a meeting;

            (3)    Determine the validity of proxies and ballots;

            (4)    Count all votes; and

            (5)    Determine the result.

    (c) An inspector may, but need not, be a director, member of a designated body, member, officer, or employee of the membership corporation. A person who is a candidate for office to be filled at the meeting may not be an inspector.

    Section 70. That the code be amended by adding a NEW SECTION to read:

    (a) Two or more members may provide for the manner in which they will vote by signing an agreement in the form of a record for that purpose. A voting agreement may be valid for a period of up to ten years.

    (b) A voting agreement created pursuant to this section is specifically enforceable, except that a voting agreement is not enforceable to the extent that enforcement of the agreement would violate the purposes of the membership corporation.

    Section 71. That the code be amended by adding a NEW SECTION to read:

    (a) A nonprofit corporation must have a board of directors.

    (b) Except as provided in section 82 of this Act, the business and affairs of the corporation must be managed by or under the direction, and subject to the oversight, of its board of directors.

    Section 72. That the code be amended by adding a NEW SECTION to read:

    A director of a nonprofit corporation must be an individual. The articles of incorporation or bylaws may prescribe other qualifications for directors. A director need not be a resident of this state or a member of the corporation unless the articles or bylaws so prescribe.

    Section 73. That the code be amended by adding a NEW SECTION to read:

    (a) A board of directors must consist of three or more directors, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

    (b) The number of directors may be increased or decreased, but to no fewer than three, from time to time by amendment to, or in the manner provided in, the articles of incorporation or bylaws.

    Section 74. That the code be amended by adding a NEW SECTION to read:

    (a) The directors of a membership corporation, other than any initial directors named in the articles of incorporation or elected by the incorporators, shall be elected at the first annual meeting of members, and at each annual meeting thereafter, unless the articles or bylaws provide some other time or method of election, or provide that some or all of the directors are appointed by some other person or designated in some other manner.

    (b) The directors of a nonmembership corporation, other than any initial directors named in the articles of incorporation or elected by the incorporators, shall be elected, appointed, or designated as provided in the articles or bylaws. If no method of designation or appointment is

set forth in the articles or bylaws, the directors, other than any initial directors, shall be elected by the board.

    Section 75. That the code be amended by adding a NEW SECTION to read:

    (a) The articles of incorporation or bylaws may specify the terms of directors. If a term is not specified in the articles or bylaws, the term of a director is one year. Except for directors who are appointed by persons who are not members or who are designated in a manner other than by election or appointment, the term of a director may not exceed twelve years.

    (b) A decrease in the number of directors or term of office does not shorten an incumbent director's term.

    (c) Except as provided in the articles of incorporation or bylaws, the term of a director elected to fill a vacancy expires at the end of the unexpired term that the director is filling.

    (d) Despite the expiration of a director's term, the director continues to serve until the director's successor is elected, appointed, or designated and until the director's successor takes office unless otherwise provided in the articles of incorporation or bylaws.

    Section 76. That the code be amended by adding a NEW SECTION to read:

    The articles of incorporation or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups of one or more directors. The terms of office and number of directors in each group do not need to be uniform.

    Section 77. That the code be amended by adding a NEW SECTION to read:

    (a) A director may resign at any time by delivering a signed notice in the form of a record to the chair of the board of directors or to an executive officer or the secretary of the corporation.

    (b) A resignation is effective when the notice is delivered unless the notice specifies a later effective time.

    Section 78. That the code be amended by adding a NEW SECTION to read:

    (a) Removal of directors of a membership corporation is subject to the following provisions:

            (1)    Except as provided in the articles of incorporation or bylaws, the members may remove, with or without cause, one or more directors who have been elected by the members, unless the articles of incorporation or bylaws provide that directors may be removed only for cause. The articles or bylaws may specify what constitutes cause for removal. See section 153(a) of this Act, bylaw amendments requiring member approval;

            (2)    Except as provided in the articles of incorporation or bylaws, if a director is elected by a voting group of members, or by a chapter or other organizational unit, or by a

region or other geographic grouping, only the members of that voting group or chapter, unit, region, or grouping may participate in the vote to remove the director;

            (3)    The notice of a meeting of members at which removal of a director is to be considered must state that the purpose, or one of the purposes, of the meeting is removal of the director; and

            (4)    The board of directors of a membership corporation may not remove a director except as provided in paragraph (c) or in the articles of incorporation or bylaws.

    (b) The board of directors may remove a director of a nonmembership corporation:

            (1)    With or without cause, unless the articles of incorporation or bylaws provide that directors may be removed only for cause. The articles or bylaws may specify what constitutes cause for removal; or

            (2)    As provided in paragraph (c).

    (c) The board of directors of a membership corporation or nonmembership corporation may remove a director who:

            (1)    Has been declared of unsound mind by a final order of court;

            (2)    Has been convicted of a felony;

            (3)    Has been found by a final order of court to have breached a duty as a director under sections 90 to 92, inclusive, of this Act;

            (4)    Has missed the number of board meetings specified in the articles of incorporation or bylaws, if the articles or bylaws provided that a director may be removed for missing the specified number of board meetings; or

            (5)    Does not satisfy at the time any of the qualifications for directors set forth in the articles of incorporation or bylaws, if the decision that the director fails to satisfy a qualification is made by the vote of a majority of the directors who meet all of the required qualifications.

    (d) A director who is designated in the articles of incorporation or bylaws may be removed by an amendment to the articles or bylaws deleting or changing the designation. See section 155 of this Act, approval of amendments by third persons.

    (e) Except as provided in the articles of incorporation or bylaws, a director who is appointed by persons other than the members may be removed with or without cause by those persons.

    Section 79. That the code be amended by adding a NEW SECTION to read:


    (a) The circuit court of the county where the principal office of a nonprofit corporation is located, or, if none in this state, in Hughes County, may remove a director from office in a proceeding commenced by or in the right of the corporation if the court finds that:

            (1)    The director engaged in fraudulent conduct with respect to the corporation or its members, grossly abused the position of director, or intentionally inflicted harm on the corporation; and

            (2)    Considering the director's course of conduct and the inadequacy of other available remedies, removal would be in the best interest of the corporation.

    (b) A member, individual director, or member of a designated body proceeding on behalf of the nonprofit corporation under paragraph (a) shall comply with all of the requirements of sections 164 to 166, inclusive, of this Act.

    (c) The court, in addition to removing the director, may bar the director from being reelected, redesignated, or reappointed for a period prescribed by the court.

    (d) Nothing in this section limits the equitable powers of the court to order other relief.

    (e) If a proceeding is commenced pursuant to this section to remove a director of a charitable corporation, the plaintiff must give the attorney general notice in record form of the commencement of the proceeding.

    Section 80. That the code be amended by adding a NEW SECTION to read:

    (a) Except as otherwise provided in paragraph (b), the articles of incorporation, or the bylaws, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, the vacancy may be filled by a majority of the directors remaining in office even if they constitute less than a quorum.

    (b) Except as provided in the articles of incorporation or bylaws, a vacancy in the position of a director who is:

            (1)    Elected by a voting group of members, by a chapter or other organizational unit of members, or by a region or other geographic grouping of members, may be filled during the first three months after the vacancy occurs only by that voting group or chapter, unit, region, or grouping;

            (2)    Appointed by persons other than the members, may be filled only by those persons; or

            (3)    Designated in the articles of incorporation or bylaws may not be filled by action of the board of directors.

    (c) A vacancy that will occur at a specific later time by reason of a resignation effective at a later time pursuant to section 77(b) of this Act, or otherwise, may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.

    Section 81. That the code be amended by adding a NEW SECTION to read:

    Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.

    Section 82. That the code be amended by adding a NEW SECTION to read:

    (a) Some, but less than all, of the powers, authority or functions of the board of directors of a nonprofit corporation under this Act may be vested by the articles of incorporation or bylaws in a designated body. If such a designated body is created:

            (1)    The provisions of sections 71 to 115, inclusive, of this Act and other provisions of law on the rights, duties, and liabilities of the board of directors or directors individually also apply to the designated body and to the members of the designated body individually. The provisions of this Act and other provisions of law on meetings, notice, and the manner of acting of the board of directors also apply to the designated body in the absence of an applicable rule in the articles of incorporation, bylaws or internal operating rules of the designated body;

            (2)    To the extent the powers, authority, or functions of the board of directors have been vested in the designated body, the directors are relieved from their duties and liabilities with respect to those powers, authority, and functions;

            (3)    A provision of the articles of incorporation regarding indemnification of directors or limiting the liability of directors adopted pursuant to subdivision 22(b)(8) or section 22(c) of this Act applies to members of the designated body, except as otherwise provided in the articles.

    (b) Some, but less than all, of the rights or obligations of the members of a nonprofit corporation under this Act may be vested by the articles of incorporation or bylaws in a designated body. If such a designated body is created:

            (1)    The provisions of sections 71 to 115, inclusive, of this Act, and other provisions of law on the rights and obligations of members also apply to the designated body and to the members of the designated body individually. The provisions of this Act and other provisions of law on meetings, notice, and the manner of acting of members also apply to the designated body in the absence of an applicable provision in the articles of incorporation, bylaws or internal operating rules of the designated body;

            (2)    To the extent the rights or obligations of the members are vested in the designated body, the members are relieved from responsibility with respect to those rights and obligations.

    (c) The articles of incorporation or bylaws may prescribe qualifications for members of a designated body. Except as otherwise provided by the articles or bylaws, a member of a designated body does not need to be:

            (1)    An individual;

            (2)    A director, officer, or member of the nonprofit corporation; or

            (3)    A resident of this state.

    (d) See section 153(a) of this Act, bylaw amendments requiring member approval.

    Section 83. That the code be amended by adding a NEW SECTION to read:

    The board of directors shall hold a meeting annually at a time stated in or fixed in accordance with the articles of incorporation or bylaws.

    Section 84. That the code be amended by adding a NEW SECTION to read:

    (a) The board of directors may hold regular or special meetings in or out of this state.

    (b) Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is considered to be present in person at the meeting.

    Section 85. That the code be amended by adding a NEW SECTION to read:

    (a) Except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted pursuant to this Act to be taken by the board of directors may be taken without a meeting if each director signs a consent in the form of a record describing the action to be taken and delivers it to the nonprofit corporation.

    (b) Action taken pursuant to this section is the act of the board of directors when one or more consents signed by all the directors are delivered to the nonprofit corporation. The consent may specify the time at which the action taken in the consent is to be effective. A director's consent may be withdrawn by a revocation in the form of a record signed by the director and delivered to the corporation prior to delivery to the corporation of unrevoked consents signed by all the directors.

    (c) A consent signed pursuant to this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.

    Section 86. That the code be amended by adding a NEW SECTION to read:

    (a) Unless the articles of incorporation or bylaws provide otherwise, or as otherwise required by law, regular meetings of the board of directors may be held without notice of the date, time, place, or purpose of the meeting.

    (b) Unless the articles of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two days' notice of the

date, time, and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

    (c) Unless the articles of incorporation or bylaws provide otherwise, the chair of the board, the highest ranking officer of the corporation, or twenty percent of the directors then in office may call and give notice of a meeting of the board of directors.

    (d) The articles of incorporation or bylaws may authorize oral notice of meetings of the board of directors.

    Section 87. That the code be amended by adding a NEW SECTION to read:

    (a) Unless otherwise required by law, a director may waive any notice required by this Act, the articles of incorporation, or the bylaws before or after the date and time stated in the notice. Except as provided by paragraph (b), the waiver must be in the form of a record, signed by the director entitled to the notice, and filed with the minutes or corporate records.

    (b) A director's attendance at or participation in a meeting waives any required notice to the director of the meeting, unless the director at the beginning of the meeting, or promptly upon arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

    Section 88. That the code be amended by adding a NEW SECTION to read:

    (a) Except as provided in paragraph (b), the articles of incorporation, or the bylaws, a quorum of the board of directors consists of a majority of the directors in office before a meeting begins.

    (b) The articles of incorporation or bylaws may authorize a quorum of the board of directors to consist of no fewer than the greater of one-third of the number of directors in office or two directors.

    (c) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless a greater vote is required by the articles of incorporation or bylaws.

    (d) A director who is present at a meeting of the board of directors when corporate action is taken is considered to have assented to the action taken unless one of the following applies:

            (1)    The director objects at the beginning of the meeting, or promptly upon arrival, to holding it or transacting business at the meeting;

            (2)    The director dissents or abstains from the action and:

            (i)    The dissent or abstention is entered in the minutes of the meeting; or

            (ii)    The director delivers notice in the form of a record of the director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation promptly after adjournment of the meeting.

    (e) The right of dissent or abstention is not available to a director who votes in favor of the action taken.

    Section 89. That the code be amended by adding a NEW SECTION to read:

    (a) Unless this Act, the articles of incorporation, or the bylaws provide otherwise, a board of directors may create one or more committees of the board that consist of one or more directors.

    (b) Unless this Act otherwise provides, the creation of a committee and appointment of directors to it must be approved by the greater of:

            (1)    A majority of all the directors in office when the action is taken; or

            (2)    The number of directors required by the articles of incorporation or bylaws to take action pursuant to section 88 of this Act.

    (c) Sections 84 to 88, inclusive, of this Act, apply both to committees of the board and to their members.

    (d) To the extent authorized by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the powers of the board of directors pursuant to section 71 of this Act except as limited by paragraph (e).

    (e) A committee may not, however:

            (1)    In the case of a membership corporation, approve or propose to members action that this Act requires be approved by members;

            (2)    Fill vacancies on the board of directors or, subject to paragraph (g), on any of its committees; or

            (3)    Adopt, amend, or repeal bylaws.

    (f) The creation of, delegation of authority to, or action by a committee does not alone constitute compliance by a director with the standards of conduct described in section 90 of this Act.

    (g) The board of directors may appoint one or more directors as alternate members of any committee to replace any absent or disqualified member during the member's absence or disqualification.

    (h) A nonprofit corporation may create or authorize the creation of one or more advisory committees whose members need not be directors. An advisory committee:

            (1)    Is not a committee of the board; and

            (2)    May not exercise any of the powers of the board.

    Section 90. That the code be amended by adding a NEW SECTION to read:

    (a) Each member of the board of directors, when discharging the duties of a director, shall act:

            (1)    In good faith; and

            (2)    In a manner the director reasonably believes to be in the best interests of the nonprofit corporation.

    (b) The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, must discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.

    (c) In discharging board or committee duties a director must disclose, or cause to be disclosed, to the other board or committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed by law, a legally enforceable obligation of confidentiality, or a professional ethics rule.

    (d) In discharging board or committee duties a director who does not have knowledge that makes reliance unwarranted may rely on the performance by any of the persons specified in subdivision (f)(1), (f)(3), or (f)(4) to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board's functions that are delegable under applicable law.

    (e) In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted may rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in paragraph (f).

    (f) A director may rely, in accordance with paragraph (d) or (e), on:

            (1)    One or more officers, employees, or volunteers of the nonprofit corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;

            (2)    Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters:

            (i)    Within the particular person's professional or expert competence; or

            (ii)    As to which the particular person merits confidence;

            (3)    A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence; or

            (4)    In the case of a corporation engaged in religious activity, religious authorities and ministers, priests, rabbis, imams, or other persons whose positions or duties the director reasonably believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented.

    (g) A director is not a trustee with respect to the nonprofit corporation or with respect to any property held or administered by the corporation, including property that may be subject to restrictions imposed by the donor or transferor of the property.

    Section 91. That the code be amended by adding a NEW SECTION to read:

    (a) A nonprofit corporation may not lend money to or guarantee the obligation of a director or officer of the corporation.

    (b) This section does not apply to:

            (1)    An advance to pay reimbursable expenses reasonably expected to be incurred by a director or officer;

            (2)    An advance to pay premiums on life insurance if the advance is secured by the cash value of the policy;

            (3)    Advances pursuant to sections 105 to 113, inclusive, of this Act;

            (4)    Loans or advances pursuant to employee benefit plans;

            (5)    A loan secured by the principal residence of an officer; or

            (6)    A loan to pay relocation expenses of an officer.

    (c) The fact that a loan or guarantee is made in violation of this section does not affect the borrower's liability on the loan.

    Section 92. That the code be amended by adding a NEW SECTION to read:

    (a) A director who votes for or assents to a distribution made in violation of this Act is personally liable to the nonprofit corporation for the amount of the distribution that exceeds what could have been distributed without violating this Act if the party asserting liability establishes that, when taking the action, the director did not comply with section 90 of this Act.

    (b) A director held liable under subsection paragraph (a) for an unlawful distribution is entitled to:

            (1)    Contribution from every other director who could be held liable under paragraph (a) for the unlawful distribution; and

            (2)    Recoupment from each person of the pro-rata portion of the amount of the unlawful distribution the person received, whether or not the person knew the distribution was made in violation of this Act.

    (c) A proceeding to enforce:

            (1)    The liability of a director under subsection paragraph (a) is barred unless it is commenced within two years after the date on which the distribution was made; or

            (2)    Contribution or recoupment under paragraph (b) is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under paragraph (a).

    (d) This section is subject to, and modified by, sections 98 to 103, inclusive, of this Act, as to any director serving without compensation.

    Section 93. That the code be amended by adding a NEW SECTION to read:

    (a) The officers of a nonprofit corporation are the individuals who hold the offices described in its articles of incorporation or bylaws, or are appointed or elected in accordance with the articles and bylaws or as authorized by the board of directors.

    (b) The articles of incorporation or bylaws or the board of directors must assign to one of the officers responsibility for preparing or supervising the preparation of the minutes of the meetings of the board of directors and the members, if any, and for maintaining and authenticating the records of the corporation required to be kept under sections 209(a) and 209(e) of this Act.

    (c) The same individual may simultaneously hold more than one office in a nonprofit corporation.

    Section 94. That the code be amended by adding a NEW SECTION to read:

    Each officer has the authority and must perform the duties set forth in the articles of incorporation or bylaws or, to the extent consistent with the articles and bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.

    Section 95. That the code be amended by adding a NEW SECTION to read:

    (a) An officer with discretionary authority must discharge the duties under that authority:

            (1)    In good faith;

            (2)    With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

            (3)    In a manner the officer reasonably believes to be in the best interests of the corporation.

    (b) The duty of an officer includes the obligation to inform:

            (1)    The superior officer to whom, or the board of directors or the committee thereof to which, the officer reports, of information about the affairs of the nonprofit corporation known to the officer, within the scope of the officer's functions, and known to the officer to be material to the superior officer, board, or committee; and

            (2)    The superior officer, or another appropriate person within the nonprofit corporation, or the board of directors, or a committee thereof, of any actual or probable material violation of law involving the corporation or material breach of duty to the corporation by an officer, employee, or agent of the corporation, that the officer believes has occurred or is likely to occur.

    (c) In discharging the duties, an officer who does not have knowledge that makes reliance unwarranted may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

            (1)    One or more officers or employees of the nonprofit corporation whom the officer reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;

            (2)    Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the officer reasonably believes are matters:

            (i)    Within the particular person's professional or expert competence; or

            (ii)    As to which the particular person merits confidence;

            (3)    In the case of a corporation engaged in religious activity, religious authorities and ministers, priests, rabbis, imams, or other persons whose positions or duties the officer reasonably believes justify reliance and confidence and whom the officer believes to be reliable and competent in the matters presented.

    Section 96. That the code be amended by adding a NEW SECTION to read:

    (a) An officer may resign at any time by delivering notice to the nonprofit corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective time. If a resignation is made effective at a later time and the board of directors or the appointing officer accepts the future effective time, the board or the appointing officer may designate a successor before the effective time if the board or the appointing officer provides that the successor does not take office until the effective time.

    (b) Except as provided in the articles of incorporation or bylaws, an officer may be removed at any time with or without cause by:

            (1)    The board of directors;

            (2)    The officer who appointed the officer being removed, unless the board provides otherwise; or

            (3)    Any other officer authorized by the articles, the bylaws, or the board.

    (c) For purposes of this section, the term, appointing officer, means the officer, including any successor to that officer, who appointed the officer resigning or being removed.

    Section 97. That the code be amended by adding a NEW SECTION to read:

    (a) The appointment of an officer does not itself create contract rights.

    (b) An officer's removal does not affect the officer's contract rights, if any, with the nonprofit corporation. An officer's resignation does not affect the corporation's contract rights, if any, with the officer.

    Section 98. That the code be amended by adding a NEW SECTION to read:

    The directors, officers, committee members, and employees of the corporation shall not, as such, be liable on its obligations.

    Section 99. That the code be amended by adding a NEW SECTION to read:

    No director, trustee, committee member, or officer serving without compensation, other than reimbursement for actual expenses, of any corporation organized pursuant to this Act, or under similar laws of another state, and which is exempt from taxation pursuant to section 501(a) of the Internal Revenue Code, 26 U.S.C. section 501(a), and is listed as an exempt organization in section 501(c) of the Internal Revenue Code, 26 U.S.C. section 501(c), or any hospital organized pursuant to chapter 34-8, 34-9, or 34-10, is liable, and no cause of action may be brought, for damages resulting from the exercise of judgment or discretion in connection with the duties or responsibilities of such director, trustee, committee member, or officer while acting in an official capacity as such director, trustee, committee member, or officer, unless the act or omission involved willful or wanton misconduct. The immunity provided pursuant to this section also applies to any designated body, any member of a designated body, and to any member of an advisory committee, serving without compensation, other than reimbursement for actual expenses, of any corporation described by this section. The immunity provided by this section is in addition to the immunity provided by sections 100 to 103, inclusive, of this Act.

    Section 100. That the code be amended by adding a NEW SECTION to read:

    Terms used in sections 100 to 103, inclusive, of this Act, mean:

            (1)    "Free clinic," a clinic in which health care services are offered voluntarily through a nonprofit corporation by health care professionals licensed or certified pursuant to the laws of this state to patients without charge or at a charge based on a sliding fee scale or the ability to pay;

            (2)    "Governmental entity," any county, municipality, township, school district, chartered governmental units, or other special districts, including any association, authority, board, commission, division, office, or task force of such governmental entity or of the State of South Dakota;

            (3)    "Nonprofit corporation," any corporation organized pursuant to this Act, and which is exempt from taxation pursuant to section 501(a) of the Internal Revenue Code, 26 U.S.C. section 501(a);

            (4)    "Nonprofit organization," any organization which is exempt from taxation pursuant to section 501(c) of the Internal Revenue Code, 26 U.S.C. section 501(c) as amended;

            (5)    "Volunteer," an individual performing services for a nonprofit organization, a nonprofit corporation, a hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity without compensation, other than reimbursement for actual expenses incurred. The term includes a volunteer serving as a director, officer, trustee, designated body, member of a designated body, committee member, advisory committee member, or direct service volunteer.

    Section 101. That the code be amended by adding a NEW SECTION to read:

    Any volunteer of a nonprofit organization, a nonprofit corporation, a free clinic, any hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity shall be immune from civil liability in any action brought in any court in this state on the basis of any act or omission resulting in damage or injury if:

            (1)    The individual was acting in good faith and within the scope of such individual's official functions and duties for the nonprofit organization, the nonprofit corporation, the free clinic, a hospital organized pursuant to chapter 34-8, 34-9, or 34-10, or a governmental entity; and

            (2)    The damage or injury was not caused by gross negligence or willful and wanton misconduct by such individual.

    Section 102. That the code be amended by adding a NEW SECTION to read:

    No immunity provided pursuant to sections 98 to 104, inclusive, of this Act, extends to any person causing personal injury or wrongful death resulting from the negligent operation of a motor vehicle.

    Section 103. That the code be amended by adding a NEW SECTION to read:


    To the extent that any volunteer, nonprofit corporation, nonprofit organization, governmental entity, or hospital organized pursuant to chapter 34-8, 34-9, or 34-10 participates in a risk sharing pool or purchases liability insurance and to the extent that coverage is afforded thereunder, the immunity provided by section 101 of this Act is deemed to have been waived and may not be raised by way of affirmative defense. This section does not apply to a volunteer serving as a director, officer, trustee, designated body, member of a designated body, committee member, or advisory committee member.

    Section 104. That the code be amended by adding a NEW SECTION to read:

    Sections 98 to 103, inclusive, of this Act, may not be construed to constitute a modification or repeal of §§ 20-9-3, 20-9-4, 20-9-4.1, 34-48A-23, and 34-48A-24.

    Section 105. That the code be amended by adding a NEW SECTION to read:

    Terms used in sections 105 to 113, inclusive, of this Act, mean:

            (1)    "Corporation," any domestic or foreign predecessor entity of a nonprofit corporation in a merger, conversion, or domestication;

            (2)    "Director" or "officer," an individual who is or was a director or officer, respectively, of a nonprofit corporation or who, while a director or officer of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation's request if the individual's duties to the corporation also impose duties on, or otherwise involve services by, the individual to the plan or to participants in or beneficiaries of the plan. The term, director, includes a member of a designated body. The terms, director or officer, includes, unless the context requires otherwise, the estate or personal representative of a director or officer;

            (3)    "Disinterested director," a director who, at the time of a vote referred to in section 108(c) of this Act or a vote or selection referred to in section 110(b) or 110(c) of this Act, is not:

            (i)    A party to the proceeding; or

            (ii)    An individual having a familial, financial, professional, or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director's judgment when voting on the decision being made;

            (4)    "Expenses," includes attorney's fees;

            (5)    "Liability," the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding;

            (6)    "Official capacity,":

            (i)    When used with respect to a director, the office of director in a nonprofit corporation; and

            (ii)    When used with respect to an officer, as contemplated in section 110 of this Act, the office in a corporation held by the officer. The term, official capacity, does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan, or other entity;

            (7)    "Party," an individual who was, is, or is threatened to be made, a defendant or respondent in a proceeding;

            (8)    "Proceeding," includes a threatened, pending, or completed proceeding.

    Section 106. That the code be amended by adding a NEW SECTION to read:

    (a) Except as otherwise provided in this section, a nonprofit corporation may indemnify an individual who is a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if the individual:

            (1)    Acted in good faith; and

            (2)    Reasonably believed:

            (i)    In the case of conduct in an official capacity, that the conduct was in the best interests of the corporation; and

            (ii)    In all other cases, that the individual's conduct was at least not opposed to the best interests of the corporation; and

            (3)    In the case of any criminal proceeding, had no reasonable cause to believe the individual's conduct was unlawful; or

            (4)    The individual engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation, as authorized by subdivision 22(b)(8) of this Act.

    (b) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in and the beneficiaries of the plan is conduct that satisfies the requirement of subsection(a)(2)(ii).

    (c) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.

    (d) Unless ordered by a court pursuant to subdivision 109(a)(3) of this Act, a nonprofit corporation may not indemnify a director:

            (1)    In connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under paragraph (a); or

            (2)    In connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis that the director received a financial benefit to which the director was not entitled, whether or not involving action in an official capacity.

    Section 107. That the code be amended by adding a NEW SECTION to read:

    A nonprofit corporation must indemnify a director to the extent the director was successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the director was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding.

    Section 108. That the code be amended by adding a NEW SECTION to read:

    (a) A nonprofit corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred by an individual who is a party to a proceeding because the individual is or was a director if the individual delivers to the corporation:

            (1)    An affirmation in the form of a record of the individual's good faith belief that the individual has met the relevant standard of conduct described in section 106 of this Act, or that the proceeding involves conduct for which liability has been eliminated by sections 98 to 103, inclusive, of this Act, or under a provision of the articles of incorporation as authorized pursuant to section 22(c) of this Act; and

            (2)    An undertaking in the form of a record to repay any funds advanced if the individual is not entitled to mandatory indemnification pursuant to section 107 of this Act and it is ultimately determined pursuant to section 109 or 110 of this Act that the individual does not meet the relevant standard of conduct described in section 106 of this Act.

    (b) The undertaking required by subdivision (a)(2) must be an unlimited general obligation of the director, but need not be secured and may be accepted without reference to the financial ability of the director to make repayment.

    (c) Authorizations pursuant to this section must be made:

            (1)    By the board of directors:

            (i)    If there are two or more disinterested directors, by a majority vote of all the disinterested directors, a majority of whom constitute a quorum for that purpose, or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; or

            (ii)    If there are fewer than two disinterested directors, by the vote necessary for action by the board in accordance with section 90 of this Act, in which authorization directors who do not qualify as disinterested directors may participate; or

            (2)    By the members.

    Section 109. That the code be amended by adding a NEW SECTION to read:

    (a) A director who is a party to a proceeding because the director is or was a director may apply for indemnification or an advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court must:

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