Beware California Corporations Code section 2105 & 2203
Companies should be aware that California imposes additional requirements on foreign corporations doing business in California before the corporation will be allowed to maintain a lawsuit in California. California Corporations Code section 2203 states that a “foreign corporation” (i.e. corporations incorporated in a state other than California) doing business in California does not have the capacity to maintain claims in California courts unless it satisfies Corporations Code section 2105.
Corporations Code section 2105 requires all foreign, including other U.S. jurisdictions, corporations, that conduct business in California to first obtain a certificate of qualification from the California Secretary of State. To obtain this certification, an agent of the corporation must fill out a standardized form that lists basic information for the company, such as contact information, and must file it with the California Secretary of State.
Notwithstanding the above, foreign corporations that fail to obtain a certificate of qualification may still file a lawsuit in California courts. Section 2203 only prohibits noncompliant foreign corporations from “maintaining” a lawsuit in California – for example, they may not continue to prosecute their claims in court if the defect persists. However, the defect maybe cured without jeopardizing a meritorious lawsuit, since a court will typically stay the lawsuit until the plaintiff can remedy the situation by paying penalties and fees and obtaining a certificate of qualification. See United Medical Management Ltd. v. Gatto (1996) 49 Cal. App. 4th 1732, 57.
While not case-dispositive in most circumstances, a foreign corporation’s failure to comply with procedural prerequisites to suing in California mayincrease the already-high cost of litigation. For example, an opposing party could file a demurrer (motion to dismiss) a foreign corporation’s claims based on a failure to comply with section 2203, and opposing a demurrer can be expensive, even if the corporation is ultimately victorious.
Thus, if you are a foreign corporation that wishes to file suit in California, the best practice is to first ensure that you have filed a certificate of qualification, and have met all other procedural requirements that pertain to corporate litigation in California. An experienced attorney can help make sure all of these boxes are checked and that the path is cleared for you to prosecute your claims without unnecessary hurdles.
Corporate and Commercial Litigation Law Firm
The above is one example of the many laws that govern corporate litigation in California, and these laws can be complex, regardless of the size of your business. To keep your company both profitable and in good legal standing, it’s essential to have a corporate and commercial litigation law firm that can provide counsel as needed. Corporate law is a vast field that’s constantly evolving, making it vital to work with a commercial law firm to make sure your company remains compliant with the latest laws. Dhillon Law Group routinely provides these services to its clients and is skilled at ensuring the best results for the companies it works with and for.
Choosing a Corporate Litigation Attorney
At Dhillon Law Group, we have extensive experience litigating a broad range of commercial disputes in state and federal courts and arbitrations throughout the country. Our clients include small and large domestic and international corporations in a wide range of industries, including technology, medicinal dispensaries, transportation, consumer services, and gig economy, to name a few, as well as high profile individuals and entrepreneurs. We make it a priority to first understand our clients’ fundamental business objectives, before crafting a litigation strategy that matches their risk tolerance, goals, and budget.
While we are known as zealous courtroom advocates, given the financial demands of litigation, we take care to explore early advantageous settlement and other resolution alternatives, to provide our clients with high-quality and cost-effective solutions while ensuring the strongest possible litigation posture. Our law firm has successfully represented clients in commercial disputes involving:
- Breach of contract
- Contractual interference
- Interference with prospective business expectancy
- Corporate investigations and white-collar defense
- Partnership disputes, intellectual property disputes, and co-founder conflicts
- False advertising
- Theft of trade secrets
- Unfair competition
Dhillon Law Group – A Leader in Corporate and Commercial Law
It is our privilege to provide commercial litigation strategy and advice to our corporate and individual clients throughout Silicon Valley and across California. Contact Dhillon Law Group directly to set up a consultation with us.
The information in this blog post (“Post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Dhillon Law Group Inc., or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter.