The Delaware Court of Chancery ruled on July 29 that the Revlon duty to seek the highest price reasonably available does not govern public benefit corporation directors in a sale of control, and that the PBC statute’s own safe harbor can extinguish both direct fiduciary claims and aiding-and-abetting exposure against deal counterparties. This is the first written judicial guidance on the question since Delaware authorized the PBC form in 2013. Boards operating as, or weighing conversion to, a PBC now have a tested process to follow, not a statute to guess at.
PRIORITY 9 | SILO: JUDICIAL
The Delaware Court of Chancery held that Revlon’s exclusive stockholder-value-maximization mandate does not apply to public benefit corporation directors in a change-of-control sale, and that DGCL Section 365(b) can shield both the board and its counterparties from fiduciary claims when the board’s process meets the statute’s terms.
The Signal
In Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., Vice Chancellor Nathan Cook addressed for the first time whether Revlon applies to a Delaware public benefit corporation in a sale of control. The Court held that it does not: Section 365(a) of the Delaware General Corporation Law requires PBC directors to balance stockholders’ pecuniary interests, the interests of those materially affected by the company’s conduct, and the public benefit named in the charter, a mandate the Court found irreconcilable with Revlon’s singular price-maximization standard.
The Court dismissed the complaint with prejudice under Section 365(b)’s statutory safe harbor, which deems a director’s fiduciary duties satisfied when a decision implicating the balancing requirement is informed, disinterested, and not one that no person of ordinary, sound judgment would approve. The Court left open whether a modified “PBC enhanced scrutiny” standard of review could still apply, but did not need to decide it here.
The Evidence
The case arose from MPower Financing, PBC’s 2025 rescue financing. Facing a covenant deadline, MPower’s board accepted new capital from two existing lender-stockholders, the Funds, on terms that could take their combined equity stake from roughly 25 percent to approximately 85 percent. A three-member special committee of disinterested, independent directors retained its own counsel and financial advisor, ran a market process with a data room, and approved the deal despite more than half of MPower’s stockholders formally requesting a vote that was never held.
Stockholders sued, alleging breach of fiduciary duty and aiding and abetting. The Court held the plaintiffs conceded the committee’s independence and disinterestedness, never pled gross negligence, and attacked only the market canvass, a pecuniary-interest argument, without addressing whether the committee considered the other two Section 365(a) interests. That gap was fatal to the claim. The opinion is posted on courts.delaware.gov under C.A. No. 2025-0898-NAC.
The Strategic Implication
The ruling crystallizes something Delaware has never said in a written opinion before now. For a PBC, balancing the public benefit against stockholder value is not a compliance overlay for a court to police after the fact. It is a standard the board itself must own and demonstrate it applied, in real time, before the safe harbor will protect the decision. A board that treats Section 365(a) balancing as a box to check for litigation risk, rather than a judgment it owns and can defend on its own record, will not survive the “PBC enhanced scrutiny” question the Court left open for the next case.
Defensive Risk. General counsel at any Delaware public benefit corporation, and any board weighing PBC conversion, are exposed on the untested edge of this ruling: the safe harbor protected MPower’s board because its committee documented balancing of all three statutory interests, not because the PBC label alone shields a sale process. A board that runs a change-of-control transaction and later produces minutes speaking only to price, with no record of how it weighed affected constituencies and the chartered benefit, remains exposed to the “PBC enhanced scrutiny” standard the Court flagged but did not resolve. Before the next sale-of-control deliberation, and no later than the next committee minutes reflecting deal discussion, general counsel should confirm the record addresses all three Section 365(a) interests, not just the market check.
Offensive Advantage. Boards operating as or converting to a PBC now have a tested template for a defensible sale process: an independent, informed, disinterested special committee, its own advisors, a genuine market check, and a contemporaneous record balancing stockholder value, affected constituencies, and the charter’s public benefit. That template turns a previously untested statute into a governance advantage. A PBC board can now negotiate mission-aligned deal terms, favor a lower-price bidder with stronger commitments to affected stakeholders, or decline an auction-style process entirely, without the Revlon-driven presumption that price alone must control, provided the committee process itself is airtight.
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