The Chancery Pivot: Delaware Says Public Benefit Corporations Don’t Have to Maximize Sale Price—And the M&A Playbook Just Got More Complicated

Delaware Chancery Rewrites the Rules for Public Benefit Corporations in Change-of-Control Deals

In a decision that will force corporate lawyers to rethink sale processes for a growing class of mission-driven entities, Vice Chancellor Nathan Cook ruled on July 29 that public benefit corporations (PBCs) are not legally required to obtain the highest reasonable price when selling the company. The ruling, reported by Reuters, marks the first time the Delaware Court of Chancery has squarely addressed whether directors of a PBC face the same Revlon duties that govern traditional corporations in a change-of-control transaction. The answer, according to Cook, is no—and the reasoning cuts to the heart of what it means to incorporate as a benefit corporation under Delaware law.

For decades, Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), has stood for the proposition that when a Delaware corporation is sold for cash or engages in a transaction that results in a change of control, the board's duty narrows to a single objective: obtaining the best price reasonably available for stockholders. That duty, enforced through enhanced scrutiny, has shaped countless M&A auctions, poison pill defenses, and board deliberations. But PBCs, governed by Delaware General Corporation Law § 362, are statutorily required to balance stockholder value with a specified public benefit and the interests of other stakeholders. Cook's ruling holds that this statutory mandate overrides the pure value-maximization framework of Revlon, giving PBC directors latitude to accept a lower bid if it better serves the corporation's broader mission.

Why This Matters for Practicing Lawyers

The immediate practical consequence is that sale processes for PBCs just became more complex and less predictable. Counsel advising a PBC board in a change-of-control scenario must now grapple with a dual mandate: maximizing value and advancing the corporation's stated public benefit. That balancing act is not just a matter of fiduciary duty—it's a matter of statutory compliance under DGCL § 362(a), which requires directors to "manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation's conduct, and the specific public benefit or public benefits identified in its certificate of incorporation."

For deal lawyers, this raises thorny questions about process design. Can a PBC board reject a higher cash offer in favor of a lower bid from a buyer committed to preserving the company's environmental mission or employee ownership structure? Under Cook's ruling, the answer appears to be yes—if the board can demonstrate that it engaged in a good-faith balancing of the statutory factors. But what does that balancing look like in practice? How much weight must be given to stockholder value versus the public benefit? And how will courts review that balancing when a disgruntled stockholder files suit alleging the board left money on the table?

The ruling also creates a potential arbitrage problem: buyers may now prefer to acquire PBCs at a discount, knowing that directors have statutory cover to accept less than the highest bid. That could chill PBC formation or, conversely, make PBCs more attractive to founders and impact investors who prioritize mission over exit multiples.

For litigators, the decision opens a new front in Delaware fiduciary duty law. Expect plaintiffs' firms to test the boundaries of Cook's holding by challenging PBC sale processes that appear to undervalue stockholder interests or that use the public benefit mandate as a fig leaf for board entrenchment. The enhanced scrutiny standard under Revlon and its progeny—see, e.g., Paramount Communications Inc. v. QVC Network Inc., 637 A.2d 34 (Del. 1994)—requires boards to show they acted reasonably in seeking the best value. But what does "reasonableness" mean when the board is statutorily obligated to consider factors other than price? The Chancery Court will have to develop a new jurisprudence to answer that question, and early cases will be closely watched.

The Broader Context: Delaware's Ongoing Recalibration of Corporate Law

Cook's ruling arrives at a moment when Delaware is actively redefining the balance between stockholder rights and board discretion. In February, the Delaware Supreme Court upheld SB 21, the state's 2025 corporate law overhaul, which limits certain stockholder challenges to transactions approved by independent committees or a majority of disinterested stockholders. That reform, which survived a constitutional challenge, was widely seen as an effort to reduce litigation friction in M&A deals and preserve Delaware's dominance as the preferred state of incorporation. The PBC ruling fits within that broader trend: it gives boards more room to maneuver, but it also raises the stakes for getting the process right.

Meanwhile, the Chancery Court's July 2 decision in the JPMorgan/Charlie Javice advancement dispute underscores that Delaware remains a forum where procedural fights can shape the substance of high-stakes litigation. In that case, a magistrate judge ruled that JPMorgan could not block Javice's advancement of legal fees, finding that the bank had not met its "challenging burden" to show that her fees were so unreasonable or abusive as to constitute bad faith. Advancement rights under DGCL § 145 are a critical tool for directors and officers facing litigation, and the ruling reinforces that Delaware courts will not lightly second-guess the amounts advanced unless the abuse is clear. For practitioners, the takeaway is that advancement disputes remain a potent source of leverage in governance and fraud cases—and that courts will err on the side of allowing advancement to continue.

What Comes Next

The PBC ruling is likely to be appealed, and the Delaware Supreme Court will have the final word on whether Revlon applies to benefit corporations. In the meantime, corporate lawyers should treat this as a signal to revisit their PBC clients' governance documents and sale-process protocols. Boards considering a sale should document their balancing of the statutory factors in real time, with clear explanations of how the chosen transaction advances both stockholder value and the corporation's public benefit. And buyers should be prepared for PBC targets to push back on price maximization as the sole metric of success.

Delaware's corporate law has always been a dialogue between flexibility and accountability. Cook's ruling tilts the balance toward flexibility for PBCs, but it also raises the bar for boards to justify their decisions. That's a trade-off that will define the next chapter of M&A practice for mission-driven companies.