/>iOnly a few publicly traded corporations are incorporated in California. Most either started life in Delaware or later decamped to that state (and more recently other states). Nonetheless, many of these corporations have their principal offices in California and/or significant operations and shareholders located in California. The Golden State has long been sensitive to the phenomenon of pseudo-foreign, or "tramp", corporations. In response, it has peppered its General Corporation Law with provisions that expressly apply to foreign corporations, provided they have certain specified nexus to the state. The most far-reaching of these provisions is Section 2115 which imposes numerous provisions of the GCL to foreign corporations "to the exclusion of the law of the jurisdiction in which it is incorporated". In general, a foreign corporation will be subject to 2115 if more than one-half of its business and one-half of its shares are held of record by persons with addresses in California (there is, of course, much more detail in the statute, but hanc marginis exiguitas non caparet.
Corporations listed on major stock exchanges for the most part do not perseverate excessively over Section 2115 because the statute expressly exempts "with outstanding securities listed on the New York Stock Exchange, the NYSE American, the NASDAQ Global Market, or the NASDAQ Capital Market". On closer inspection, however, there appears to be a noticeable omission in this list of exchanges. Nasdaq has three listing tiers, the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market, and the statute only lists the last two tiers. The omission of the Nasdaq Global Select Market is unlikely to have been intentional because that market has the highest listing criteria. Apparently, the omission arises from California's view that the Nasdaq Global Market itself is comprised of two tiers. Apparently, this was the view of the Commissioner of Corporations when he certified the Nasdaq Global Market for purposes of an exemption under the Corporate Securities Law of 1968: "Moreover, effective July 1, 2006, the Nasdaq National Market was renamed the NASDAQ Global Market. The NASDAQ Global Market now contains two tiers (NASDAQ Global Market and NASDAQ Global Select Market) . . .". The Commissioner, however, has no authority to administer or enforce Section 2115.
Some readers will likely protest that Section 2115 is unconstitutional. Indeed, that was the conclusion of the Delaware Supreme Court in Vantage Point Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005). However, a California Court of Appeal has arrived at the opposite conclusion in Wilson v. Louisiana-Pacific Resources, Inc., 138 Cal. App. 3d 216, 187 Cal. Rptr. 852 (1983). Therefore, the status of Section 2115 may depend upon where the case is brought.
DExit And The Concomitant Malapropisms Continue
On Friday, the global entertainment company, AMC Networks Inc., filed preliminary proxy materials that include a proposal to approve the company's "redomestication to the State of Nevada by conversion". Readers will recognize that this statement makes no sense because it conflates two different processes, domestication and conversion. See Converting A Corporation Is Not Domestication.
