Internal-Affairs Doctrine Law and Legal Definition

Internal-Affairs Doctrine is a choice of law rule in corporations’ law which says that law of the state of incorporation should determine issues relating to the internal affairs of a corporation. This doctrine ensures that issues like voting rights of shareholders, distributions of dividends and corporate property, and the relations among a company’s investors and managers are all determined in accordance with the law of the state in which the company is incorporated. On the other hand, the external affairs of a corporation, like labor and employment issues and tax liability, are typically governed by the law of the state in which the corporation is doing business. For example, if there is a dispute between two shareholders of a Delaware corporation, it should normally be decided using Delaware law, even if the company operates in another state.