Who Knew? The California General Corporation Law Governs Contracting And Conveyancing By Foreign Corporations

Section 208 of the California Corporations Code makes it difficult for a California corporation to wriggle out of contracts or conveyances made in the corporation's name.  Under the statute, a contract or conveyance will bind the corporation (and the corporation will acquire rights thereunder) if it was:

  • Authorized or ratified by the board of directors; or
  • Done within either:
    • the scope of the authority, actual or apparent, conferred by the board; or
    • the agency power of the officer executing it.

The statute applies to the corporation regardless of whether a contract is wholly or partially executory.  The only exception is when a board's authority is limited by a law other than the General Corporation Law.

What, if anything, does this have to do with foreign corporations?  Subdivision (c) of Section 208 provides that Section 208 applies to:

  • contracts and conveyances made by "foreign corporations in this state"; and
  • all conveyances by foreign corporations of real property situated in California. 

The determination of where real property is located should not be controversial in nearly all cases.  However, the legislature does not explain what it means to be a foreign corporation in this state.  Other provisions of the General Corporation Law that apply to foreign corporations are far more specific.  For example, Section 1601 governing shareholder inspection rights applies to any foreign corporation keeping any records in California or having its principal executive office in California.