California Assemblyman Curt Hagman has introduced a bill in the California legislature that will, if enacted, repeal California’s corporate long-arm statute that imposes provisions of California corporate law on non-California corporations with substantial contacts in California. The bill (AB 2260) was introduced as a “spot bill” (i.e., a placeholder bill that does nothing other than identify a specific statutory provision to be amended) on February 24, 2012, and was substantially amended on March 29, 2012 to provide for the repeal of California Corporations Code Section 2115. For many private companies operating in California that organize as Delaware corporations (generally regarded as a preferred state for incorporating), Section 2115 creates uncertainty at times regarding whether California or Delaware corporate law controls. For example, when a Delaware corporation subject to Section 2115 undertakes to effect a merger, California and Delaware each impose different shareholder consent requirements and have different procedures for non-consenting shareholders to exercise dissenters’ rights, resulting in duplicative and sometimes inconsistent requirements and procedures. Similar to the impetus for the recently enacted JOBS Act, repealing Section 2115 is another example of deregulatory legislation aimed at removing hindrances to growth companies operating in California.
The text of AB 2260 can be viewed at:http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_2251-2300/ab_2260_bill_20120329_amended_asm_v98.pdf