A more thorough explanation:

Definition: The nerve-center test is a method used by courts to determine the principal place of business of a company. This is done by examining where the central decision-making authority of the company lies. Factors that are considered include the locations where the corporate officers, directors, and sometimes shareholders reside, and where they direct and control the corporation's activities.

Example: Let's say a company has its headquarters in New York City, but all of its top executives and directors live and work in Los Angeles. In this case, the nerve-center test would likely determine that the company's principal place of business is in Los Angeles, even though the headquarters are in New York City.

Explanation: This example illustrates how the nerve-center test works. Even though the company's headquarters are in New York City, the central decision-making authority of the company is located in Los Angeles, where the top executives and directors reside and direct the company's activities. Therefore, the nerve-center test would determine that the company's principal place of business is in Los Angeles.