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Does California Corporate Law Really Govern 20% of All Public Companies?

On Tuesday, the Deal Professor (aka Berkeley Law School Professor Steven Davidoff Solomon) wrote an interesting column for The New York Times’ Dealb%k.  According to the Professor, California is the headquarters state for 20% of all companies with securities listed on the New York and Nasdaq stock exchanges.  He finds this number particularly impressive in light of the fact that California accounts for only 12% of the country’s population.

The fact that a corporation has its headquarters in California doesn’t mean that it is incorporated here (a distinction not mentioned in the column).  Delaware continues to lead all other states as the jurisdiction for incorporation.  Readers of this blog, however, will know that this doesn’t necessarily mean that Delaware’s corporate law necessarily applies to Delaware corporations headquartered in California.  Here are a few provisions of the California General Corporation Law that are explicitly applicable to foreign corporations having their principal executive offices in the state:

  • Annual report requirement (Section 1501)
  • Shareholder list inspection (Section 1600)
  • Shareholder inspection of accounting books and records and minutes (Section 1601)

Other California statutes apply to foreign corporations without regard to the location of their principal executive offices, including:

  • Effectiveness of limitations in articles (Section 208)
  • Issuance of replacement certificates (Section 419)
  • Immunity for certain share transfers (Section 420)
  • Action to contest election or appointment made in California (Section 719)
  • Shareholder derivative actions (Section 800)
  • County assessor right to records of foreign corporations owning, claiming, possessing or controlling property in California (Section 1506)
  • Shareholder right to obtain post shareholder meeting results of any foreign corporation qualified to transact intrastate business in California or with domestic or foreign subsidiaries qualified to transact intrastate business in California (Sections 1509-1511)

In addition, all of Chapter 21 of the GCL applies to foreign corporations transacting intrastate business, except as otherwise provided.  Chapter 21 includes California’s infamous “pseudo-foreign” corporation statute, Section 2115, which imposes a long list of GCL sections meeting specified tests to foreign corporations.  Section 2115, however, does not apply to any corporation with outstanding securities listed on the New York, NYSE Amex, the Nasdaq Global Market, or Nasdaq Capital Market (Section 2115(c)).  Finally, Chapter 22 criminalizes various corporate activities.  Section 2260 provides that in a prosecution for violation of many of these statutes, it is not a defense that the corporation is a foreign corporation if it was carrying on business or keeping an office therefor in California.

One life in history . . .


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