The Statutory Framework

I. The Statutory Framework

A. The General Corporation Law (Corp. Code § 100 et seq.)

California's General Corporation Law (GCL), codified at Cal. Corp. Code § 100 et seq., governs the formation, governance, and dissolution of corporations organized under California law. The GCL is materially more protective of minority shareholders than Delaware's General Corporation Law. Among the substantive divergences: California requires cumulative voting in many closely-held corporations (§ 708), imposes mandatory inspection rights that cannot be eliminated in the bylaws (§§ 1600–1602), and authorizes a statutory buyout in lieu of involuntary dissolution that has no Delaware analog (§ 2000). The GCL coexists with a separate Close Corporation election (§ 158), which permits shareholders to govern the company by agreement in ways that would otherwise violate ordinary corporate norms — including by dispensing with a board.

B. The California Revised Uniform Limited Liability Company Act (RULLCA)

LLCs formed or operating in California are governed by RULLCA, Cal. Corp. Code § 17701.01 et seq., which replaced the Beverly-Killea Act effective January 1, 2014. RULLCA permits substantial customization through the operating agreement but contains a list of non-waivable provisions (§ 17701.10(c)) that include the duty of loyalty (subject to limited modification), the obligation of good faith and fair dealing, the right to access records, and the power of a court to dissociate a member or order judicial dissolution. RULLCA distinguishes between member-managed and manager-managed LLCs (§ 17704.07), with fiduciary duties tracking management authority. The statutory buyout provision, § 17707.03, mirrors § 2000 of the GCL and gives non-dissolving members a path to cash out a member who has triggered dissolution.

C. The Uniform Partnership Act (UPA / RUPA)

General and limited partnerships are governed by California's enactment of RUPA, Cal. Corp. Code § 16000 et seq., with limited partnerships subject to the California Revised Uniform Limited Partnership Act (§ 15900 et seq.). RUPA codifies fiduciary duties of loyalty and care (§ 16404), the obligation of good faith and fair dealing (§ 16404(d)), and the right of any partner to demand a formal accounting (§ 16405). Partnership dissociation and dissolution are governed by §§ 16601–16603 and §§ 16801–16807, with buyout valuation rules at § 16701.

D. The Internal Affairs Doctrine and § 2115 (Quasi-California Corporations)

The internal affairs doctrine ordinarily applies the law of the state of incorporation to disputes about corporate governance. California departs from that rule for so-called "quasi-California" corporations under Cal. Corp. Code § 2115. A foreign corporation falls within § 2115 if (i) more than half of its property, payroll, and sales are in California (averaged on a property/payroll/sales factor), and (ii) more than half its outstanding voting securities are held of record by California residents. When triggered, § 2115 imports a long list of GCL provisions — including cumulative voting, removal of directors, indemnification, derivative-suit standing, and dissenters' rights — over the foreign corporation's home-state law. Although Delaware courts have rejected § 2115 as an unconstitutional intrusion on Delaware's internal affairs (see VantagePoint Venture Partners 1996 v. Examen, Inc. (Del. 2005) 871 A.2d 1108), California courts continue to enforce it, creating real conflict-of-laws traps for Delaware-incorporated, California-operating businesses.

This analysis is for informational purposes only and does not constitute legal advice. Consult qualified counsel for advice specific to your situation. Attorney advertising.