This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
After a corporation has obtained a charter, it must still face the question of ascertaining its rights and powers outside of its home state if it desires to do an interstate or an international business. Strictly speaking, a charter does not in itself create an existence that can be recognized outside the state or nation which gives the charter. The "domicile" of the corporation, as the lawyers explain it, must be within its home jurisdiction. In the famous case of the Bank of Augusta v. Earle, decided in 1839, the United States Supreme Court said, speaking of incorporation: "It exists only in the contemplation of the law and by virtue of the law, and where that law ceases to operate and is no longer obligatory, the company can have no existence." If this theory were always literally and fully applied, it would be necessary to create a new corporation for every state in which an enterprise is being conducted. To avoid so unworkable a conclusion, Chief Justice Story brought into play the doctrine of interstate and international comity. "The laws of one state," he said, "have no binding force, it is true, in any other state but they should be recognized and so far as possible applied as a matter of courtesy." The comments of the English barrister, E. Hilton Young, on the doctrines of corporate entity and of interstate comity in American jurisprudence, are amusing and well founded. "No sooner is it admitted," he says, "that juristic persons have no existence except in the contemplation of the law which created them, than a fiction is invented to enable them to claim a universal existence. A fictitious disability is overcome by a fictitious recognition, and thus one fiction cancels out the other".
The tendency of modern thought and practice is toward giving recognition in all civilized countries to commercial associations formed under the laws of other countries. In England the "Companies Consolidation Act" of 1908 requires certain formalities of foreign companies which carry on business in the United Kingdom; by complying with these formalities, any such company may open a branch office and operate on equal terms with English companies. Conventions have been made by England with France, Belgium, Italy, Germany, Spain, Greece, Tunis, Austria, and Russia for reciprocal admission of commercial associations to civil rights. Since early in the sixteenth century, it has been agreed that "a foreign corporation can appear in its corporate character before the English courts and be regarded as a person by the laws of England".
In nearly all the Latin countries, not only of Europe but also of South America, it is easy for a foreign corporation to obtain rights equivalent to those of a domestic corporation by the same simple process of registration. Among European countries, Russia and Austria are reported to be most hostile toward foreign corporations, while Italy and England assume an especially liberal attitude.
A fair illustration of international practice is the current law of Argentina with regard to foreign corporations, which is as follows:
Corporations organized under the laws of foreign countries may do business in the nation without previously acquiring the authority of the government providing they give proof before competent magistrates of having been constituted in accordance with the law of their respective countries and register the statutes and other documents appertaining thereto with the Public Registrar of trade.
The provisions of the preceding article shall from the promulgation of this act be in force for the corporations whose country of origin admits reciprocity.
One question that arises in connection with all foreign corporations is: When may it be said to be "doing business" within a given jurisdiction? The customary rule is to the effect that isolated transactions may be carried on by any corporation without its having been previously registered and licensed, just as by any natural person. But in case a foreign corporation is conducting a regular business and especially if it is maintaining a branch office, then it must be registered in order to make its contracts enforcible. There is, of course, no fixity about this rule, and it is often a delicate question to tell whether a corporation is actually doing business within a given jurisdiction or not.