This not so fabulous fable is about a small Nevada corporation, Cwmni Cyfyngedig, Inc. ("CCL").  It is set in the not too distant future.

Dick Plantagenet had founded CCL as a purveyor of red and white rose themed products.  Needing more capital, Dick sold a 51% of the voting stock to another Nevada corporation, Teoranta, Inc. ("Teo"), which was in turn wholly owned by the behemoth Aksjeselskap, Inc., a Delaware corporation ("Aks").  

In January 2019, Dick was surprised to hear Henry Tudor that was demanding inspection of CCL's accounting books, records and minutes.  Dick immediately sought the advice from his learned but ill-fated counsel, William Catesby.  Dick remonstrated, "What possible legal grounds does Henry have to inspect CCL's records?  CCL has no office, employees or even any business in California."  Catesby answered that California's statute applies to any subsidiary of a foreign corporation that it is itself subject to the statute.  

Increasingly wroth, Dick argued that CCL was a subsidiary of Teo, not Aks.  Catesby replied that Section 189 of the California Corporations Code defines a subsidiary of a specified corporation to mean a corporation "shares of which possessing more than 50 percent of the voting power are owned directly or indirectly through one or more subsidiaries by the specified corporation".  Catesby further elucidated:

"Because Teo owns 51% of CCL's voting stock and Aks owns 100% of Teo, CCL is ineluctably a subsidiary of Aks.  Section 189, you see, is like a flea: 'Great fleas have little fleas upon their backs to bite 'em, And little fleas have lesser fleas, and so ad infinitum.'"*

Dick as not satisfied, protested "Surely, that can't be enough!  Neither Aks nor Teo has any office in California."  Catesby acknowledged that this was certainly plain and true, but  advised:

"Aks stores a handful of its accounting records in California.  Henry (He would be 'Hank' to his friends, if he had any) has seized on this fact.  He argues that this is enough to subject Aks to shareholder inspection under Corporations Code Section 1601 as a result of a recent amendment (AB 2237).  As now in effect, the statute purports to apply 'any foreign corporation keeping any records in this state [California]'.  I know that its an incredible overreach, but you'll have to blame the California legislature, not me."

To be continued . . . .

*Augustus De Morgan, A Budget of Paradoxes, Vol. II.