The following post comes to us from Stephen M. Bainbridge, Professor of Law at the UCLA School of Law. Professor Bainbridge blogs on corporate law and other topics at ProfessorBainbridge.com. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
In Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., [1] the Delaware Supreme Court explained that when a target board of directors enters Revlon-land, the board’s role changes from that of “defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company.” [2]
Unfortunately, the Court’s colorful metaphor obfuscated some serious doctrinal problems. What standards of judicial review applied to director conduct outside the borders of Revlon-land? What standard applied to director conduct falling inside Revlon-land’s borders? And when did one enter that mysterious country?
By the mid-1990s, the Delaware Supreme Court had worked out a credible set of answers to those questions. As for the borders of Revlon-land, the Court had explained that: