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Revlon in Review
In March 1986, the Supreme Court of Delaware issued its landmark opinion in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986) (“Revlon”), enunciating the duty of directors of a Delaware corporation to seek the highest price for the corporation’s stockholders when the corporation is for sale or when a break-up has become inevitable. In perhapsthe most quoted statement in the decision, the court held that, in these circumstances, “[t]he directors’ role changed from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company.” Id. at 182 (emphasis added).
Following the Revlon decision, there has been much litigation and academic discussion of what circumstances trigger the Revlon duty and what do not, as well as what actions a board of directors may take, in addition to conducting an auction, to satisfy that duty. It is submitted that Revlon and its progeny are not crystal clear, and many decisions of the Delaware Chancery Court appear to be inconsistent, to some extent, with precedential decisions of the Delaware Supreme Court, as well as with each other. Academics have attempted to rationalize these decisions and come to a conclusion as to what the law is or should be. This note will not do that. Rather, the objective of this note is to provide a snapshot of the important decisions with a view to giving practical guidance to corporate directors as to:
- the circumstances that may give rise to the Revlon duty and
- what actions directors should take in order to discharge that duty.