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CALIFORNIA CORPORATE & SECURITIES LAW

What Law Governs Real Property Conveyances By Foreign Corporations?

Consider the following fact pattern:

Joe is the Chief Executive Officer of Transient, Inc., a Delaware corporation that is headquartered in Dallas, Texas.  Transient’s sole asset is 100 acres of undeveloped land in California.  Without consulting, much less obtaining the authorization of Transient’s board of directors or stockholders, Joe enters into a land sales contract with Innocent Developer, Inc., a Nevada corporation.  The contract is negotiated and executed by the parties in New York City, where Innocent is headquartered, and includes a New York choice of law clause.  When Transient’s board learns that Joe has deeded the property to Innocent, it is beyond upset and wants to have the conveyance due to Joe’s failure to obtain either board or stockholder approval.

Does anyone think that California law will apply?  The California legislature does.  Section 208 of the California Corporations Code states that it applies to contracts and conveyances made by foreign corporations “in this state” and to “all conveyances by foreign corporations of real property situated in this state”.  Section 208(b) provides that any contract or conveyance made in the name of a corporation that is done within the scope of the authority, actual or apparent, conferred by the board or within the agency power of the officer executing it binds the corporation, whether the contract is executed or wholly or in part executory.

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