Craig Conway was sacked after the board lost trust in him

The board said it has appointed founder and chairman Dave Duffield in Mr Conway's place after losing confidence in his ability to lead.

The sacking comes just weeks after a US judge cleared the way for a hostile $7.7bn (�4.3bn) takeover bid from its rival Oracle.

Next week, Oracle is launching legal action to clear other bid obstacles.

Lengthy struggle

Oracle has been chasing PeopleSoft for a year and a half. Its latest tender offer is due to expire on 8 October.

My priority is to build on the core values on which this company was founded. David Duffield See here for share price

PeopleSoft has consistently said that Oracle's offer is not high enough and that its customers would suffer if it was taken over, but it is unlikely that the bid will be raised until all legal matters have been resolved.

PeopleSoft has rejected several offers from Oracle already this year, including one of $9.4bn back in February when PeopleSoft's share price was higher.

Legal action

The court ruling three weeks ago, which made Oracle's bid seem more viable, related to an anti-trust case brought by the US Justice Department. The court found that a takeover would not harm customers buying business software.

With this ruling in its favour, Oracle decided to push on by challenging PeopleSoft's defensive measures by arguing that they are unlawful.

In court proceedings which are due to start on Monday, Oracle is to challenge the legality of a commitment made by PeopleSoft to refund $2bn to customers if the firm was to be taken over within two years and product support was to suffer as a consequence.

In addition, Oracle is set to challenge PeopleSoft's "poison pill" defence, a mechanism under which a takeover can trigger the issue of a slew of new shares which then makes the acquisition too expensive.

The trials are expected to last for two weeks. On the witness list are both the sacked PeopleSoft chief Mr Conway and his former boss from his days at Oracle, chief executive Larry Ellison.

Beyond these legal obstacles, a takeover would also require European approval and a ruling by the European Commission's competition authority is expected later this month.