Opinion ID: 2180171
Heading Depth: 1
Heading Rank: 10

Heading: California Section 2115

Text: VantagePoint contends that section 2115 of the California Corporations Code is a limited exception to the internal affairs doctrine. Section 2115 is characterized as an outreach statute because it requires certain foreign corporations to conform to a broad range of internal affairs provisions. Section 2115 defines the foreign corporations for which the California statute has an outreach effect as those foreign corporations, half of whose voting securities are held of record by persons with California addresses, that also conduct half of their business in California as measured by a formula weighing assets, sales and payroll factors. [20] VantagePoint argues that section 2115 mandates application of certain enumerated provisions of California's corporation law to the internal affairs of `foreign' corporations if certain narrow factual prerequisites [set forth in section 2115] are met. Under the California statute, if more than one half of a foreign corporation's outstanding voting securities are held of record by persons having addresses in California (as disclosed on the books of the corporation) on the record date, and the property, payroll and sales factor tests are satisfied, then on the first day of the income year, one hundred and thirty five days after the above tests are satisfied, the foreign corporation's articles of incorporation are deemed amended to the exclusion of the law of the state of incorporation. [21] If the factual conditions precedent for triggering section 2115 are established, many aspects of a corporation's internal affairs are purportedly governed by California corporate law to the exclusion of the law of the state of incorporation. [22] In her comprehensive analysis of the internal affairs doctrine, Professor Deborah A. DeMott examined section 2115. As she astutely points out: In contrast to the certainty with which the state of incorporation may be determined, the criteria upon which the applicability of section 2115 hinges are not constants. For example, whether half of a corporation's business is derived from California and whether half of its voting securities have record holders with California addresses may well vary from year to year (and indeed throughout any given year). Thus, a corporation might be subject to section 2115 one year but not the next, depending on its situation at the time of filing the annual statement required by section 2108. [23]