If a foreign corporation – that is, a corporation organized under the laws of any state other than California – is considered by the state to be a quasi-California corporation, it will be subject to a number of enumerated provisions of the California Corporations Code.

What corporations are considered quasi-California corporations? Section 2115 of the California Corporations Code provides that a foreign corporation is a quasi-California corporation if (1) the average of the corporation’s property, payroll, and sales factors in the state exceeds 50 percent, and (2) more than half of its outstanding voting securities are held by persons having California addresses (as disclosed on the books of the corporation on the record date).

To determine whether the company meets the first prong, simply add (1) the percentage of the company’s property (measured in value) located in California; (2) the percentage of payroll that was paid in California; and (3) the percentage of total sales made in California. Then divide the result by 3. If this figure is greater than 50, and if the percent of outstanding voting securities are held by people with California addresses is greater than 50, then the company is indeed a quasi-California corporation.

Publically traded companies can also fall under Section 2115’s test unless their outstanding securities are listed on the New York Stock Exchange or the American Stock Exchange, or they are quoted on the NASDAQ.

When a foreign corporation qualifies as a quasi-California corporation, California law supersedes the law of the jurisdiction of incorporation with respect to:

• the election and removal of directors
• a director’s liability for breach of duty and unlawful distributions
• cumulative shareholder voting
• voting in corporate reorganizations
• changing the number of directors
• rights of inspection
• shareholder meetings

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