I noticed the following description of California's principal "pseudo-foreign" corporation statute in a recently filed registration statement:

Section 2115(b) of the California Corporations Code imposes certain requirements of California corporate law on corporations organized outside California that, in general, are doing more than 50% of their business in California and have more than 50% of their outstanding voting securities held of record by persons residing in California.

This is a readily comprehensible description of the statute, but its generality masks some of the technicalities.

There is no test in Section 2115 based on "doing business" per se.  The actual test requires that the average of the corporation's property factor, the payroll factor, and sales factor be greater than 50%.  Corporations are required to calculate these factors for purposes of apportioning income for California tax purposes.  Thus, the place to find corporation’s property, payroll and sales factor is Schedule R (Apportionment and Allocation of Income) to the California corporate tax return.

Another technicality is the reference to the word "residing".  Section 2115 doesn't refer to where a shareholder resides.  Rather, the test is whether more than one-half of a corporation's voting securities are held of record by persons having addresses in California.  The addresses are not necessarily the residence addresses but the addresses "appearing on the books of the corporation on the record date for the latest meeting of shareholders held during its latest full income year.  If no meeting was held during that year, the date is the last day of the latest full income year.

Having an address in California may not necessarily constitute a shareholder as a resident of the state.  Although the term "resident" occasionally puts in an appearance (e.g., Sections 1510 and 1511), it is not defined in the General Corporation Law.

Happy Canada Day!

For our neighbors to the north, today is Canada Day.  This holiday, formerly known as Dominion Day, has been celebrated since 1868.  If you're so inclined and looking for a place to celebrate, the government of Canada has put together this list.