Wachtel Lipton's Ted Mirvis told the Delaware Supreme Court this morning in the oral arguments for Airgas v. Air Products that shareholders and directors can advance an annual meeting date, but not without limits, and not, as in this case, to set two annual meetings within four months, during the same fiscal year, with no new results or financial statements to review, but only to achieve the early removal of a staggered board director.
In response to the Justices' questions, Mr. Mirvis conceded that the statute does not require that meetings be held 365 days apart, and that moving the meeting forward or backward for a month would almost certainly be reasonable. Mr. Mirvis considered whether moving an annual meeting from summer to winter might be justified by legitimate business purposes, but suggested that it would make no sense for Airgas, since the fiscal year did not change, and that was not in fact the motivation for the proposed change.
Cravath's Gary Bornstein faced heavy questioning when he told the Justices that the proper legal analysis had to focus on the text of the charter, not the underlying policies. Nothing in the text of the charter or the statute, said Mr. Bornstein, required that the staggered terms be exactly or approximately three years. Instead, the language of the charter focused on "full terms," and the legal inquiry should as well. It would be a dramatic change in the law, said Mr. Bornstein, to preclude corporations from determining the length of their directors' terms.
In response to Justice Berger's suggestion that the term "annual" seemed to suggest approximately a year, or yearly, and that the 13-month requirement maximum might be as easily interpreted to suggest an approximation of 12 months, rather than to merely set a maximum without a minimum, Mr. Bornstein responded that the purpose of the 13-month rule was to ensure directors' responsiveness, not to set precise or approximate terms.
In rebuttal, Ted Mirvis pointed out that most corporations that have "full term" directors nonetheless in their shareholder communications characterize those directors as serving for "three years," suggesting that the use of the "full term" language was not intended to allow truncation of an annual term. By contrast, if Air Products' interpretation were accepted, said Mr. Mirvis, then a corporation would be precluded from moving its annual meeting from January to June, even if their fiscal year changed, because two meetings in the same calendar year would be prohibited.