Quasi-foreign corporation
Encyclopedia
A quasi-foreign corporation (also known as a pseudo-foreign corporation) is a corporation
incorporated in a jurisdiction
with which it has minimal business contacts. Corporations may incorporate in foreign jurisdictions in order to minimize liability, taxes, or regulatory interference.
Offshore corporations are a common example, as are Delaware corporation
s and Nevada corporation
s in the United States
.
provides that a corporation's internal affairs are governed by the jurisdiction in which it is incorporated. However, many jurisdictions apply local law to foreign corporations in certain determinations such as piercing the corporate veil
.
Some jurisdictions have gone further in attempting to control the activities of quasi-foreign corporations.
Corporations Code applies many aspects of California corporate law to foreign corporations operating in California under Californian ownership, including many provisions dealing with director liability and shareholder authority. While these rules may apply in suits brought against foreign corporations in California courts, Delaware courts refuse to apply Section 2115 in suits against Delaware corporations.
ese corporate statute of 2006 provides that "no foreign company having its main office in Japan or the primary purpose of which is to carry on business in Japan may engage in transactions on a continuous basis in Japan" and that "any person who has engaged in transactions in violation of the provision of the preceding paragraph shall be jointly and severally liable
with the foreign company to any counterparty for such transactions."
Before the statute was passed, many bank
s and other multinational corporations operated in Japan as foreign entities in order to avoid Japanese regulations requiring banking and securities businesses to be separated by Chinese wall
s. These companies, along with international chambers of commerce and other organizations, extensively lobbied the Japanese government to change the language of the draft bill.
The solution was for the House of Councillors, the upper house of the Diet of Japan
, to add a rider
to the bill calling for "all efforts... to ensure that existing foreign companies in Japan and future investments that may be made by foreign companies into Japan will not be adversely impacted."
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
incorporated in a jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
with which it has minimal business contacts. Corporations may incorporate in foreign jurisdictions in order to minimize liability, taxes, or regulatory interference.
Offshore corporations are a common example, as are Delaware corporation
Delaware corporation
The Delaware General Corporation Law is the statute governing corporate law in the state of Delaware. Delaware is well known as a corporate haven. Over 50% of U.S...
s and Nevada corporation
Nevada Corporation
A Nevada corporation is a corporation incorporated under Chapter 78 of Nevada Revised Statutes of the U.S. state of Nevada.Nevada, like the state of Delaware , is well known as a corporate haven...
s in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Legal regimes
Generally, the internal affairs doctrineInternal affairs doctrine
The internal affairs doctrine is a choice of law rule in corporations law. Simply stated, it provides that the "internal affairs" of a corporation The internal affairs doctrine is a choice of law rule in corporations law. Simply stated, it provides that the "internal affairs" of a corporation The...
provides that a corporation's internal affairs are governed by the jurisdiction in which it is incorporated. However, many jurisdictions apply local law to foreign corporations in certain determinations such as piercing the corporate veil
Piercing the corporate veil
Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it...
.
Some jurisdictions have gone further in attempting to control the activities of quasi-foreign corporations.
California
Section 2115 of the CaliforniaCalifornia
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
Corporations Code applies many aspects of California corporate law to foreign corporations operating in California under Californian ownership, including many provisions dealing with director liability and shareholder authority. While these rules may apply in suits brought against foreign corporations in California courts, Delaware courts refuse to apply Section 2115 in suits against Delaware corporations.
Japan
The JapanJapan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese corporate statute of 2006 provides that "no foreign company having its main office in Japan or the primary purpose of which is to carry on business in Japan may engage in transactions on a continuous basis in Japan" and that "any person who has engaged in transactions in violation of the provision of the preceding paragraph shall be jointly and severally liable
Joint and several liability
Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be:* jointly liable, or* severally liable, or* jointly and severally liable.-Joint liability:...
with the foreign company to any counterparty for such transactions."
Before the statute was passed, many bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and other multinational corporations operated in Japan as foreign entities in order to avoid Japanese regulations requiring banking and securities businesses to be separated by Chinese wall
Chinese wall
In business, a Chinese wall or firewall is an information barrier implemented within a firm to separate and isolate persons who make investment decisions from persons who are privy to undisclosed material information which may influence those decisions...
s. These companies, along with international chambers of commerce and other organizations, extensively lobbied the Japanese government to change the language of the draft bill.
The solution was for the House of Councillors, the upper house of the Diet of Japan
Diet of Japan
The is Japan's bicameral legislature. It is composed of a lower house, called the House of Representatives, and an upper house, called the House of Councillors. Both houses of the Diet are directly elected under a parallel voting system. In addition to passing laws, the Diet is formally...
, to add a rider
Rider
Rider may refer to:People:* Fremont Rider , American writer and librarian* H. Rider Haggard , British novelist* Rider Strong , American actor, director, producer and screenwriter...
to the bill calling for "all efforts... to ensure that existing foreign companies in Japan and future investments that may be made by foreign companies into Japan will not be adversely impacted."