In resolving an issue of first impression, the Delaware Court of Chancery (court) recently held that directors of a Delaware public benefit corporation (PBC) approving a change-of-control transaction are not required to maximize stockholder value under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986). See Drakes Landing Assocs., L.P. v. Tilden Park Cap. Mgmt., L.P., C.A. No. 2025-0898-NAC (Del. Ch. July 29, 2026). As Section 365(a) of Delaware’s General Corporation Law (DGCL) provides, directors of a PBC must balance stockholders’ pecuniary interests alongside other constituencies’ interests materially affected by the corporation’s conduct and the corporation’s stated public benefit.

Case Background and the Transaction

• MPower Financing, PBC (MPower), a Delaware PBC providing international student financing, faced an urgent need for $17 million in minimum cash by Jan. 31, 2025, under its debt covenants, after earlier equity-raising efforts failed.
• Existing lenders Tilden Park Capital Management, L.P. (Tilden Park) and King Street Capital, L.P., together holding roughly $109 million in company debt and 25.5% of common stock, proposed a $20 million financing package with a debt-to-equity conversion feature at $2.04 per share (later raised to $2.25 per share), which would increase their combined ownership to nearly 85%, substantially diluting other stockholders.
• The MPower Board of Directors (Board) approved the term sheet on a non-exclusive basis, with the Tilden Park designees to the Board recusing themselves, and then formed a three-member special committee comprised of disinterested, independent directors to evaluate the transaction (special committee).
• The special committee retained independent legal counsel and a financial advisor, directed the financial advisor to seek less dilutive alternatives, and ran a market check, though plaintiffs alleged the search was not thorough and that an alternative stockholder-group offer was rejected without full vetting. The special committee approved the financing transaction on March 28, 2025.

Issue of First Impression: Does Revlon Apply to a PBC in a Change-of-Control Transaction?

• The court recognized that the Revlon issue — whether Revlon (requiring directors in a change-of-control transaction to maximize stockholder value) applies to a PBC in a change-of-control transaction — is an issue of first impression.
• The court held that Revlon does not apply because Section 365(a) of the DGCL requires directors to balance stockholders’ pecuniary interests against other constituencies’ interests and the corporation’s stated public benefit, which is in tension with Revlon’s singular focus on value maximization.
• The court found it plausible that Revlon’s underlying standard of review — enhanced scrutiny, which the court labeled “PBC enhanced scrutiny” — may still apply to a PBC board of directors’ balancing decision, but expressly declined to decide whether that standard governed the outcome.

The Safe Harbor of Section 365(b) of the DGCL as the Dispositive Basis for Dismissal

• The court ultimately did not need to resolve the Revlon issue because plaintiffs failed to plead facts sufficient to rebut the statutory safe harbor in Section 365(b) of the DGCL, which deems a PBC director’s fiduciary duties satisfied if the decision is informed, disinterested, and not one that no person of ordinary, sound judgment would approve.
• Plaintiffs conceded the special committee members were disinterested and independent, narrowing the analysis to whether the special committee members were “informed” and whether the decision amounted to “waste.”
• Regarding the “informed” issue, the court held that plaintiffs failed to plead facts supporting a reasonable inference that the special committee was not informed under either the business judgment rule or the enhanced scrutiny standard of Revlon, emphasizing that the complaint filed by plaintiffs addressed only the special committee’s alleged failure to canvass the market thoroughly (implicating only stockholders’ pecuniary interests) without addressing the other two statutory interests it must balance.
• Specifically, under the business judgment rule, plaintiffs conceded that they failed to plead facts supporting a reasonable inference that the special committee acted with gross negligence, noting that in the corporate context gross negligence is akin to recklessness.
• Moreover, under enhanced scrutiny, plaintiffs failed to plead facts supporting a reasonable inference that the special committee’s efforts to inform itself fell outside the range of reasonableness. The court noted that directors of a PBC must consider and balance a broader scope of interests under Section 365(a) than their “traditional corporation” counterparts, and held that plaintiffs failed to address the three interests, noting that their focus was only on the alleged failure to do a “more thorough job” in canvassing the market to find a better transaction.
• The court then addressed the waste claim and found that plaintiffs did not (and could not) allege that MPower received nothing of value because the corporation obtained urgently needed financing, and mere disagreement with the special committee's process does not support a waste claim.

Practical Takeaways and Notes

• Although not resolving the question of whether a form of enhanced scrutiny applies to balancing decisions by PBC directors, the Drakes decision confirms (a) a distinct standard governing PBC directors in change-of-control contexts, and (b) that the safe harbor of Section 365(b) — turning on whether a decision is informed, disinterested, and not wasteful — may be dispositive.
• Although not quoted in its entirety in the Drakes decision, Section 141(a) of the DGCL provides:

The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation. If any such provision is made in the certificate of incorporation, the powers and duties conferred or imposed upon the board of directors by this chapter shall be exercised or performed to such extent and by such person or persons as shall be provided in the certificate of incorporation.

• Section 141(a), therefore, provides a mechanism to modify a director’s fiduciary duties. As recognized by the court in New Enterprise Associates 14, L.P. v. Rich, 295 A.3d 520, 555-56 (Del. Ch. 2023):

  Section 141(a)…consists of a grant of authority followed by an exception. The first sentence gives the board nearly plenary authority over the business and affairs of the corporation “except as may be provided otherwise in this chapter or in its certificate of incorporation” (the “Board Power Exception”). The Board Power Exception authorizes modifications to the board-centric regime that appear in the DGCL (“in this chapter”) or the charter (“in its certificate of incorporation”). The second sentence confirms that if a modification appears in the charter, then the board's powers and duties “shall be exercised or performed to such extent and by such person or persons as shall be provided in the certificate of incorporation.”

See also McRitchie v. Zuckerberg, 315 A.3d 518, 576-77 (Del. Ch. 2024) (discussing the Board Power Exception).

• In sum, although limitations may exist, it is possible to modify directors’ fiduciary duties (including Revlon duties) by adopting a provision in a corporation’s certificate of incorporation modifying the directors’ fiduciary duties under Section 141(a). Section 141(a) applies to so-called “traditional corporations” and PBCs.