Foreign Corporations: “It’s like déjà vu all over again.”


Public companies like to have have their homes in California, they just don’t like to incorporate here.  It seems that there is nothing new this situation.

In 1913, the great migration of corporations from New Jersey to Delaware began when the Garden State under the Governorship of Woodrow Wilson decided that it didn’t need the revenue derived from granting corporate charters and enacted unfavorable business regulation.   In 1924, then Commissioner of Corporations Edwin M. Daugherty had this to say about foreign corporations:

The State Corporation Department can not and has no desire to discriminate between “domestic” (California) corporations and these so-called “foreign” foreign corporations when considering and acting upon applications for permission to sell securities.  Furthermore, any criticism or suggestion contained herein does not and is not intended to apply to corporations organized outside of California to transact business in this and other states.  .  . .

Apparently many of these corporations are formed to avail themselves of laws which their organizers deem more favorable than those of California.

The State of California undoubtedly is losing large revenue because of this situation.

Fifth Biennial Report of the State Corporation Department (1924).  Some things haven’t changed.

For more on Commissioner Daugherty, see my post from December or 2011.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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