Delaware Supreme Court Reverses Lyondell Chancery Court Decision; Gives Directors More Protection in Approving M&A Deals

March 31, 2009
In a much-anticipated ruling, the Delaware Supreme Court recently gave some breathing room to independent directors in change-of-control situations. The court held that absent self-interest or an intent to do harm, a target board’s imperfect efforts to satisfy its Revlon duty are evaluated as a breach of the duty of care rather than a breach of the duty of loyalty. The court also found that no Revlon duty arises until the target actually embarks on a transaction that will result in a change of control, not merely when the company is “in play.”

This update examines the ramifications of the decision, including the future of bad faith claims and the continued importance of adhering to a standard vetting process once a company embarks on a transaction that could result in a change of control.