Incorporate Your Text

This is going to be one of those chapters where an outline is going to help. Much like torts, there are elements you are going to have to memorize before you can accurately apply them to a given fact situation.

Of course, the incorporation process is of utmost importance, as well as the promoter's liability $($including novation$).$ It would benefit you to know why many incorporate in Delaware as well as the elements of the corporate charter.

The fun stuff comes later $-$ after incorporation. There will be specific situations dealing with directors, officers, and bylaws. Two of the more important topics include piercing the corporate veil and termination of the corporation. And really thinkabout the role of corporate management and the related topic of the all$-$important business judgment rule $("$BJR$").$ A working knowledge of the characteristics and comparisons of the duty of loyalty and the duty of care $-$ specifically Exhibit $22\mathrm{.}1-$ is an applicable area of interest. Then, it would be in your best interest to know about the rights of shareholders, specifically the right of information and the right to vote, with special emphasis on proxy voting. As far as the SOX Act of $2002,$ simply have a general idea of what it is and why it exists.

Mr$.$ Incorporator $($Smooth Operator$)$

Your mission this week is to provide a detailed analysis of all fact situations $($utilizing textbook terms$/$phrases$/$concepts$)$:

a$.$ "Roofin$/$ McNeel is planning to start a home roofing business in Greenville, North Carolina. He plans to start modestly but hopes to expand his business within $5($five$)$ years to neighboring towns including Winterville, Wilson, Raleigh, and Goldsboro. Within $10($ten$)$ years, McNeel would like to expand to neighboring states including Virginia, Maryland, and South Carolina. His inclination is to incorporate in Delaware."

Is McNeel's inclination correct? Why or why not? Are there any other facts you would like$/$need to know which would shed light on this situation? What would be the advantages of incorporating in Delaware? What about any drawbacks? What would you advise McNeel to put in his corporate charter?

b$.$ Bob, the ambitious owner of Bob's Big Boy Burger, finds himself at a crossroads. Bob's Big Boy Burger faces a financial downturn, prompting Bob to take desperate measures to salvage the business. In a bid to cut costs and expedite the rebranding process, Bob begins commingling his personal and corporate finances. Instead of maintaining separate bank accounts and meticulously documenting business transactions, he starts using the company's funds for personal expenses, blurring the line between his personal assets and those of the business. What a pickle!

Moreover, Bob neglects to hold regular board meetings or document key decisions formally. Corporate formalities, such as keeping meeting minutes, issuing stock certificates, and adhering to required protocols, fall by the wayside in the fast$-$paced attempt to revitalize the company. As the financial challenges persist, Bob, in desperation, resorts to taking out personal loans using the company's name without proper authorization or documentation. Bob just can't "ketchup" with the paperwork!

In a bold attempt to revive the fortunes of Bob's Big Boy Burger, Bob decides to diversify into the dessert market, introducing a line of signature ice cream sundaes named "Scoop$-$a$-$Doodle$-$Doo Delights." Sheila, his ever$-$loyal secretary$,$ suggests this sweet venture after discovering a rising trend in dessert consumption.

Bob, exercising his business acumen, conducts thorough market research and collaborates with renowned dessert chefs to develop unique, mouthwatering ice cream concoctions. With Sheila's support, Bob ensures that the decision$-$making process is transparent, documenting the entire creative journey in a series of amusingly titled "Sundae Chronicles."

Recognizing the potential financial risks associated with venturing into uncharted dessert territory, Bob convenes regular board meetings. During these meetings, he encourages open discussions, inviting each board member to share their "flavorful" insights. The board meticulously analyzes market trends, consumer preferences, and potential challenges, all while enjoying an array of ice cream samples as a part of their "Brain$-$Freeze Brainstorming Sessions."

The whole dessert idea? Six months later it's a DISASTER. Sale plummet. Nobody is buying these desserts and the Board has a real ice cream "headache" from Bob's action. One Board Member, Gerald, wants to sue Bob! "What a crazy decision he made," cries Gerald. $"$Us and the shareholder should sue him for negligence and breach of all fiduciary duties!"