In my experience, companies most often hold board and shareholder meetings at or near their principal executive offices .  As a result, many corporations hold their meetings in California even though they may be incorporated in Delaware, Nevada or some other jurisdiction.  Geographical convenience, however, can have unforeseen consequences.  Several provisions of the California General Corporation Law apply to foreign corporations based on where they hold their board or shareholder meetings.  These include:

Election Contests.  Section 709 of the California Corporations Code empowers the California Superior Court of the “proper county” to “try and determine” the validity of any election or appointment of any director of any foreign corporation if the election was held or the appointment was made in California.  An action may be brought under Section 709 by any shareholder or any person who claims to have been denied the right to vote.  Under this statute, the Court has broad authority to:

• determine the person entitled to the office of director
• order a new election to be held or appointment to be made,
• determine the validity, effectiveness and construction of voting agreements and voting trusts, the validity of the issuance of shares and the right of persons to vote; and
• direct such other relief as may be just and proper.

Annual Report.  California’s annual report requirement (Corporations Code Section 1501) applies to a foreign corporation having its principal executive office in California or customarily holding meetings of its board in California.  This requirement may not be a concern to many public companies because the statute will be deemed satisfied if: (i) the corporation has an outstanding class of securities registered under Section 12 of the Securities Exchange Act of 1934; and (ii) complies with SEC Rule 14a-16 with respect to the obligation to furnish an annual report to shareholders under SEC Rule 14a-3(b).  At the other end of the spectrum, some smaller companies won’t be subject to the requirement if the annual report is expressly waived in the bylaws and the corporation has less than 100 shareholders of record (determined as provided in Section 605).  I find, however, that many out-of-state corporations fail to waive the annual report requirement in their bylaws.

Inspection Rights.  California’s shareholder inspection (Section 1600) and director inspection (Section 1602) statutes apply to any foreign corporation having its principal executive office in California or customarily holding meetings of its board in California.