Suppose that you are a consultant thatgives advice to small entrepreneurial firms that want to becomecorporations. As you know, becoming incorporated andpublicly-traded (issuing common stock) involves adopting Articlesof Incorporation, which establish the corporation’s Board ofDirectors structure, the number of authorized and issued shares,voting procedures, etc.
Today, a client walks in your officeand explains that she has successfully operated a small restaurantfor many years and is ready to expand. Therefore, she wishes toincorporate and raise enough common equity to open new locationsall over Texas.
The client, however, is concernedabout other firms trying to acquire control of her firm in thefuture and asks your advice about 1) what voting rules, if put inthe articles of incorporation, might discourage a takeover, 2)whether the number of directors and the timing of their re-electionis an important consideration, and 3) if there are any other ideasyou might have to help her fend off possible take-over attempts.Give her some advice.
