Who knew? California General Companies Act Governs Contracts and Transfers by Foreign Companies | Allen Matkins

Section 208 of the California Corporations Code makes it difficult for a California corporation to opt out of contracts or transfers made on behalf of the corporation. By law, a contract or transfer will bind the company (and the company will acquire rights under it) if it was:

  • Authorized or ratified by the board of directors; Where
  • Made in either:
    • the extent of authority, real or apparent, conferred by the council; Where
    • the agency power of the executing officer.

The law applies to the company whether a contract is fully or partially enforceable. The only exception is when the authority of a board is limited by a law other than the general company law.

What, if any, has this to do with foreign companies? Subsection (c) of article 208 provides that article 208 applies:

  • contracts and transfers made by “foreign companies in that state”; and
  • all transfers by foreign companies of real estate located in California.

Determining the location of real estate should not be controversial in almost all cases. However, the legislator does not explain what it means to be a foreign company in that state. Other provisions of the General Company Law which apply to foreign companies are much more specific. For example, Section 1601 governing shareholders’ inspection rights applies to any foreign company that maintains records in California or has its principal executive office in California.

Elizabeth G. Ortiz