On July 29, 2026, Vice Chancellor Nathan Cook of the Delaware Court of Chancery issued a decision addressing, for the first time, the fiduciary duties of directors of a public benefit corporation (PBC)—including in a sale of control.1 Under the PBC form, the purpose of corporate decision-making is not merely to advance stockholder value—as is the ultimate purpose of decision-making for a traditional Delaware corporation—but instead to balance three sets of interests: a specific public benefit purpose chosen by the PBC, the best interests of those materially affected by the corporation’s conduct, and stockholders’ pecuniary interests.2 Delaware law first authorized the PBC form in 2013, and since that time, the form has grown in prominence, with many significant public and private companies operating as PBCs. Until this decision, however, there had not yet been direct case law guidance addressing PBCs. The decision, accordingly, is noteworthy for PBCs and companies considering adopting the PBC form.
In this case, a private PBC required additional capital to fund its business. The company decided to pursue a financing round with two preexisting investors, one of whom had two designees on the company’s board of directors. The board formed an independent special committee to negotiate the financing. Under the terms of that financing, investors ultimately acquired convertible debt that would take their ownership from approximately 25 percent of the company’s capital stock to nearly 85 percent once converted. Current and former stockholders of the company subsequently brought claims against the special committee alleging a breach of fiduciary duties, and against the investors for aiding and abetting the purported breach. In this new decision, the court dismissed the claims.
A central issue in the case was whether the Delaware Revlon doctrine, governing a sale of control of a company, applies in the context of a PBC. That doctrine—established in the namesake 1986 Delaware case—provides that when directors of a traditional Delaware stock corporation sell control of the corporation, (1) the purpose of directors’ fiduciary duties is to obtain the best value reasonably available for stockholders and (2) Delaware courts will generally apply a heightened level of scrutiny to determine if directors acted reasonably in designing a sale process. In this case, the court determined that the purpose of directors’ fiduciary duties in a PBC context necessarily changes from the traditional Revlon analysis: that is, the purpose of fiduciary duties for PBC directors cannot simply be obtaining the best value for stockholders, but rather to balance stockholder pecuniary interests, the corporation’s public benefit purpose, and the best interests of those materially affected by the corporation’s conduct.
With respect to whether a court should apply a heightened standard of judicial review to directors’ conduct in a sale of control of a PBC, the court alluded to the possibility of such an approach—and also suggested that the special committee’s process would have survived such a standard. Ultimately, however, the court applied a safe harbor provision from the PBC section of the Delaware General Corporation Law, which provides that, in matters implicating the PBC balancing requirement, a PBC director is deemed to satisfy the director’s fiduciary duties if the director’s decision is (1) informed, (2) disinterested, and (3) “not such that no person of ordinary, sound judgment would approve” (which phrase, the court determined, meant that the decision did not amount to corporate waste). Here, where the plaintiffs’ primary allegations about the special committee’s process related to stockholders’ pecuniary interests (specifically, whether the special committee conducted a proper market check) and did not challenge the totality of the special committee’s balancing obligations, the court concluded that the plaintiffs had not adequately pled a challenge to the special committee’s informed, disinterested decision-making.
Additionally, although the court did not squarely decide the issue, it suggested that the claims should likely be dismissed under Delaware’s new safe harbor statute applicable to corporations generally when navigating transactions involving conflicts of interest and that the special committee members would be protected by customary director exculpation provisions in the company’s certificate of incorporation.3
The decision is a significant development for PBCs, which continue to grow in number. The case affirms that the purpose of fiduciary duties is, as was intended, different in the PBC context. The court’s application of the PBC safe harbor also indicates that where a PBC board acts in a disinterested and informed manner with a rational purpose in matters implicating PBC balancing obligations, such board should have significant protection and flexibility.
For more information on this or any related matter, please contact any member of Wilson Sonsini’s Corporate Governance or Corporate Governance Litigation practices.
[1] See Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., C.A. No. 2025-0898-NAC (Del. Ch. July 29, 2026). A copy of the decision is available here: https://courts.delaware.gov/opinions/download.aspx?id=398860.
[2] For more background on the PBC form, visit our publication here: https://www.wsgr.com/en/insights/converting-to-a-delaware-public-benefit-corporation-lessons-from-experience.html.
[3] Our publication on Delaware’s new safe harbor statute is available here: https://www.wsgr.com/en/insights/delaware-enacts-landmark-corporate-law-amendments.html. A summary of the Delaware Supreme Court opinion upholding that statute is available here: https://www.wsgr.com/en/insights/delaware-court-of-chancery-interprets-new-section-144-and-applies-heightened-presumption-of-director-independence.html.
