The California Taxpayer and Shareholder Protection Act of 2003

Ten years ago, there was concern about so-called “expatriate corporations”. These were corporations that incorporated in foreign jurisdictions to minimize their tax liability. In reaction to this phenomenon, the legislature added The California Taxpayer and Shareholder Protection Act of 2003 to the Public Contract Code. 2003 Cal. Stats. ch. 657. In general, this act prohibits a state agency from contracting with a publicly held expatriate corporation, as defined, or its subsidiary, unless the corporation provides specified shareholder rights and other legal and financial arrangements or the contract serves a compelling public interest. Cal. Pub. Cont. Code § 10286.1.

The act specifies an eclectic mixture of rights. For example, the corporation must agree to hold no more than one of every four annual shareholder meetings in a location outside the United States and, in the event that the entity holds an annual meeting outside the United States, the entity agrees to provide access to that meeting through a Web cast or other technology that allows the entity’s shareholders to do both of the following: (i) Listen to the meeting, watch the meeting, or both; and (ii) Send questions that will be addressed at the meeting.

I also find it interesting that several of these rights are defined by reference to the Model Business Corporation Act. For example, transactions interested director transactions must be approved in accordance with the applicable law, as amended from time to time and as interpreted by the courts, of the United States jurisdiction in which the entity was previously incorporated, or, if the entity was not previously incorporated, in accordance with the terms set forth in the Model Business Corporations Act, as may be amended from time to time and as interpreted by the courts.


Written by:

Published In:

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.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.