As part of its battle to acquire Anheuser-Busch (AB), InBev filed a declaratory action in Delaware Chancery Court yesterday seeking the court's judgment that InBev could remove all AB directors from the board without cause by obtaining the written consent of a majority of the shareholders to do so. You might think they would wait for the annual meeting to wage a proxy battle, but the terms of 5 of the 13 directors are not up until 2009.
This issue arises from the fact that prior to 2007 AB's directors were divided into three classes so they could be elected to 3-year staggered terms. Such "classified" directors could not be removed except for cause under Delaware law. See 8 Del. C. 141(k). Unclassified directors can be removed without cause. Id.
In 2006 the AB shareholders approved an amendment to its certificate of incorporation that declassified the directors beginning in 2007. Directors elected to 3-year terms in 2006 still have a year to go in their terms.
The question for the court seems to be whether declassified directors serving out their classified terms can be removed without cause. You can access the complaint here.
Fascinating question, but it is curious that InBev isn't willing to assert a cause for removal since it implies in paragraph 4 of its complaint that the current directors have not complied with their fiduciary duties.
-Marc Ward
Comments