In a new filing with the Securities and Exchange Commission today, Yum said it made an important amendment to its corporate bylaws that now requires disputes between shareholders and the company be handled in North Carolina’s court system.
Why that state? Because, even though Yum is headquartered in Louisville — and the top brass works part of the time in suburban Dallas — the company itself is incorporated in North Carolina, where the fast food giant’s principal office is in Raleigh. (Of course, that office might be little more than a mailbox drop.) Adding a little confusion, the specific court is actually 167 miles away, in Mecklenburg County’s Charlotte.
The SEC filing doesn’t say what prompted the company to choose the N.C. court system. But it follows a high-profile dispute between dissident stockholder Keith Meister of Corvex Management that ended last fall when he was given a seat on the board of directors. Corvex had built up a 5% stake to press the company into spinning off its flagging China Division, a step it’s planning to complete by Oct. 31.
Yum’s 12-member board of directors approved the bylaw change last Friday, according to today’s SEC 8-K filing. It’s a new Section 9 of Article 8 called “Forum for Adjudication of Certain Disputes.” Here’s the full text:
Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the sole and exclusive forum and venue for: (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director, officer, Shareholder, employee or agent of the Corporation to the Corporation or the Corporation’s Shareholders, including a claim alleging the aiding and abetting of any such breach of fiduciary duty; (iii) any action asserting a claim against the Corporation or any current or former director, officer, Shareholder, employee or agent of the Corporation arising out of or relating to any provision of the North Carolina Business Corporation Act or the Corporation’s Articles of Incorporation or Bylaws or as to which the North Carolina Business Corporation Act confers jurisdiction upon the Mecklenburg County Superior Court (as defined below); (iv) any action asserting a claim governed by the internal affairs doctrine; or (v) any other action asserting a claim against the Corporation or any current or former director, officer, Shareholder, employee or agent of the Corporation that relates to the “internal affairs” of the Corporation for purposes of Section 55-7-50 of the North Carolina Business Corporation Act, shall be the North Carolina General Court of Justice, Superior Court Division, with venue in Mecklenburg County, North Carolina (the “Mecklenburg County Superior Court”), or, if venue is not proper in the Mecklenburg County Superior Court, the North Carolina General Court of Justice, Superior Court Division, in any county in which venue is proper, or, if the North Carolina General Court of Justice lacks jurisdiction over any such action or proceeding, then the United States District Court located in the Western District of North Carolina. Any person or entity purchasing, otherwise acquiring or retaining any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Section 9. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Section 9 with respect to any current or future actions or claims.