According to which theory does a corporation's nationality align with the laws of the country it was formed in?

The incorporation test is the principle that establishes that a corporation's nationality, and thus its legal status, is determined by the laws of the country in which it was formed. This means that when a corporation is created or incorporated in a specific jurisdiction, it acquires the legal identity and nationality of that jurisdiction, which in turn dictates the applicable legal framework and regulations governing its operations.

This theory emphasizes the formalities of incorporation, such as registration and compliance with local laws, and recognizes the sovereignty of the jurisdiction where the entity is legally established. Consequently, a corporation registered under the laws of one country is typically governed by that country's corporate laws, irrespective of where it may conduct its business activities.

Understanding the incorporation test is crucial for recognizing how corporations interact with legal frameworks across different jurisdictions, as their rights and obligations will be tied to the laws under which they were initially incorporated.