1. When Does California Corporations Code § 2115 Apply?
Section 2115 targets a limited group of foreign corporations with unusually strong California connections. A corporation must satisfy both statutory tests, and the statute specifies when its requirements begin and end. Foreign qualification to do business in California, a California headquarters, or a California registered agent does not by itself establish that § 2115 applies.
The Business-Activity Test
Under § 2115(a)(1), the average of the corporation's California property, payroll, and sales factors must exceed 50 percent during its latest full income year. The statute incorporates the relevant tax-allocation factors rather than asking generally whether California is the company's "main" place of business.
For a parent corporation, the calculation can also require a consolidated analysis of qualifying subsidiaries. A company therefore should not assume that the test can be answered solely from the address of its headquarters or the location of its board meetings.
The Shareholder Test
The corporation must also satisfy a separate ownership requirement. More than one-half of its outstanding voting securities must be held of record by persons whose addresses on the corporation's books are in California.
The statute contains detailed rules for securities held through broker-dealers, banks, clearing corporations, and other nominee holders. For that reason, beneficial ownership and record ownership should not be treated as interchangeable when evaluating the test.
Application Does Not Begin the Moment Both Tests Are Met
Section 2115 includes its own timing provisions. Under subdivision (d), the listed California requirements generally become applicable beginning with a later income year determined under the statutory formula, or after entry of a final court order establishing that the tests have been met.
Subdivision (e) also addresses when § 2115 ceases to apply after one of the tests is no longer satisfied. This timing question can be important when a board action occurs close to a change in the company's California business activity or shareholder base.
2. What Corporate Governance Rules Can § 2115 Bring into the Analysis?
Section 2115 does not make the entire California Corporations Code applicable to a foreign corporation. Subdivision (b) identifies particular provisions that may apply. Those provisions concern several core internal-governance matters, including director standards, indemnification, distributions, shareholder meetings and voting, certain mergers and reorganizations, corporate records, and inspection rights. The statute itself should therefore be checked against the specific board or shareholder issue rather than cited as a general statement that "California law governs."
Director Standards Are One Expressly Listed Area
Corporations Code § 309 is among the provisions listed in § 2115(b). Section 309 addresses the standard of conduct for directors of California corporations, including good faith, the corporation's and shareholders' best interests, reasonable inquiry, and reliance on specified officers, employees, professionals, or committees.
This creates a more precise question than whether a director generally owes "fiduciary duties." If § 2115 applies, the analysis may require determining whether § 309 governs the challenged board conduct and how that rule interacts with the law of the state of incorporation.
Voting and Shareholder Rights Are Also Included
The statute lists specific provisions concerning director elections, removal, vacancies, cumulative voting, supermajority voting, reorganizations, dissenters' rights, records, and inspection rights.
These subjects can materially affect a corporate action. A dispute over a shareholder vote, for example, may present a different § 2115 issue from a dispute over a commercial contract entered into by the corporation. The statute focuses on specified aspects of corporate internal governance, not every legal issue involving a foreign company.
3. Does § 2115 Override Delaware Law for a Delaware Corporation?
The answer cannot be reduced to a simple yes or no. California's statute states that the listed provisions apply to qualifying foreign corporations "to the exclusion" of the law of the jurisdiction of incorporation. Delaware courts, however, apply the internal affairs doctrine to questions involving relationships among a Delaware corporation, its directors, officers, and shareholders. That creates a genuine conflict when § 2115 is invoked against a Delaware corporation.
California Courts Have Recognized the Statutory Scheme
In Wilson v. Louisiana-Pacific Resources, Inc., 138 Cal. App. 3d 216 (1982), a California Court of Appeal applied § 2115 to a Utah corporation that satisfied the statutory California contacts and rejected constitutional challenges raised in that case.
The California Supreme Court later described § 2115 in Greb v. Diamond International Corp., 56 Cal. 4th 243 (2013), as a statute addressing certain foreign corporations with substantial California business and shareholder contacts. Greb, however, concerned corporate survival after dissolution and did not resolve the Delaware choice-of-law conflict discussed below.
Delaware Takes a Different Approach to Its Corporations' Internal Affairs
In VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005), the Delaware Supreme Court held that Delaware law governed a shareholder voting issue involving a Delaware corporation, rather than the California provision invoked through § 2115. The court relied on the internal affairs doctrine, under which the law of the state of incorporation governs matters concerning a corporation's internal relationships.
The practical lesson is not that § 2115 is irrelevant to Delaware corporations. It is that a company should identify both the substantive governance issue and the forum in which the issue may be decided before assuming which state's rule controls.
4. Which Corporations Are Excluded from § 2115?
The statute contains an important exclusion that prevents its application to some corporations even when their California contacts are substantial. Under § 2115(c), the statute does not apply to corporations with securities listed on specified national securities exchanges, including the New York Stock Exchange, NYSE American, Nasdaq Global Market, and Nasdaq Capital Market. It also contains an exclusion for certain wholly owned corporations.
Exchange Listing Can Change the Answer
A privately held foreign corporation and an exchange-listed corporation can therefore reach different results even with similar California operations. Before analyzing any of the substantive provisions listed in § 2115(b), the threshold exclusions in subdivision (c) should be checked first.
5. What Should a Company Verify before Relying on § 2115?
A useful § 2115 analysis starts with records, not assumptions. The relevant information includes the corporation's state of incorporation, its latest full income-year property, payroll, and sales factors, the record addresses of holders of voting securities, any nominee-holder information relevant to the statutory calculation, its securities-listing status, and the date of the board or shareholder action at issue.
The Governing Question Is Usually Narrower Than "California or Delaware?"
For many companies, the real issue is whether a particular California provision listed in § 2115 applies to a particular internal corporate action at a particular time. A director-duty issue may implicate § 309. A voting dispute may implicate one of the voting provisions expressly listed in § 2115(b). A contract dispute may fall outside that framework altogether.
That issue-specific approach also keeps corporate governance analysis separate from the broader services covered by Business, Corporate & Securities Law, business counseling, or corporate risk and governance work. Section 2115 is best treated as a distinct choice-of-law question, not as a substitute for a complete governance review.
21 Sep, 2026
