Elan gets order against board directors

Tue, Sep 7, 2010, 01:00

IRISH BIOTECH group Elan has secured a High Court injunction preventing dissident board directors from using US courts to trigger an “unauthorised review” of corporate governance at the company.

In an affidavit, the company alleged that directors Jack Schuler and Vaughan Bryson had breached the terms of a settlement agreement under which they joined the board of Elan last year.

It also alleges the two directors are trying to undermine an “independent review” already being conducted by a US legal firm McKenna, Long Aldridge (assisted by William Fry in Dublin) into corporate governance matters at the company, including issues relating to the investment in the company by Johnson & Johnson.

Mr Schuler is a long-time critic of the way Elan has been managed, particularly of chief executive Kelly Martin whose removal he has sought previously. He is a significant shareholder in Elan.

Mr Bryson, an industry veteran and former chief executive of Eli Lilly, was nominated by Mr Schuler for a board position before last year’s settlement.

In the affidavit, Elan says the two men had queried the independence of the independent review commissioned by the board, which is due to report back to a meeting of all directors on September 15th.

Elan alleges the two men, without authorisation from the board, instructed a separate US legal firm to undertake a review of the actions at the centre of the row. That firm, based in California, had demanded information and documents from the company and the lawyers undertaking its independent review. It threatened to issue proceedings in a US court today if its demands were not met.

However, Paul Sreenan SC, for Elan, told Mr Justice Seán Ryan that the two directors were bound by agreement to the jurisdiction of Irish law.

Elan was granted an injunction restraining Mr Bryson and Mr Schuler from instructing lawyers to maintain the US proceedings.

Mr Justice Ryan said Elan’s case was that it was not open to one or two directors to act independently of the board of directors. The urgency and seriousness of the matter was clear, he added. The nature of the steps to be taken under the aegis of the company could potentially be irreparable and merited the granting of interim injunctions.

The company said last night that the injunction was sought to protect the ongoing independent review “previously authorised by the audit committee of Elan’s board of directors, until the full board can consider its results at next week’s board meeting and consider whether any further action is necessary”.