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DE Supreme Court Reverses In Lyondell
The Delaware Supreme Court has reversed the Court of Chancery and held that corporate directors did not breach their fiduciary duty of loyalty by failing to act in good faith in connection with a merger pursuant to the standard set forth in Revlon v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 1986. Under Revlon, in the context of a sale, a corporate board is charged with performing “its fiduciary duties in the service of a specific objective: maximizing the sale price of the enterprise.” Lyondell Chemical Co., et al. v. Walter E. Ryan, Jr., et al., No. 401-2008 (Del. Mar. 25, 2009).
The court stated, however, “Revlon duties do not arise because a company is 'in play.' The duty to seek the best available price applies only when a company embarks on a transaction ' on its own initiative or in response to an unsolicited offer ' that will result in a change of control.” Here, the court concluded that the record established “that the directors were disinterested and independent; that they were generally aware of the company's value and its prospects; and that they considered the offer, under the time constraints imposed by the buyer, with the assistance of financial and legal advisors. At most, this record creates a triable issue of fact on the question of whether the directors exercised due care. There is no evidence, however, from which to infer that the directors knowingly ignored their responsibilities, thereby breaching their duty of loyalty.”
A full analysis of this decision will be published in an upcoming issue.
DE Supreme Court Reverses In Lyondell
The Delaware Supreme Court has reversed the Court of Chancery and held that corporate directors did not breach their fiduciary duty of loyalty by failing to act in good faith in connection with a merger pursuant to the standard set forth in
The court stated, however, “Revlon duties do not arise because a company is 'in play.' The duty to seek the best available price applies only when a company embarks on a transaction ' on its own initiative or in response to an unsolicited offer ' that will result in a change of control.” Here, the court concluded that the record established “that the directors were disinterested and independent; that they were generally aware of the company's value and its prospects; and that they considered the offer, under the time constraints imposed by the buyer, with the assistance of financial and legal advisors. At most, this record creates a triable issue of fact on the question of whether the directors exercised due care. There is no evidence, however, from which to infer that the directors knowingly ignored their responsibilities, thereby breaching their duty of loyalty.”
A full analysis of this decision will be published in an upcoming issue.
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