Introduction

On July 29, 2026, the Delaware Court of Chancery issued a decision of first impression in Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., C.A. No. 2025-0898-NAC, holding that Revlon’s price-maximization duty does not apply to public benefit corporation (“PBC”) directors in change-of-control transactions. The Court suggested that a modified form of enhanced scrutiny — termed “PBC enhanced scrutiny” — may apply as a standard of review but ultimately dismissed all claims under Section 365(b)’s safe harbor without ultimately addressing and applying what PBC enhanced scrutiny would look like. 

Background

MPower Financing, PBC, a Delaware public benefit corporation focused on international student financing, faced a cash crunch in early 2025. Two of MPower’s largest lenders — Tilden Park Capital Management and King Street Capital (the “Funds”) — collectively held nearly $109 million of MPower’s debt and 25.5% of its common stock.

The Funds proposed a $20 million financing in which their ~$109 million in debt would convert to equity at $2.25 per share — a steep discount to the $15.50 per share from the last financing round four years earlier — increasing the Funds’ ownership from approximately 25% to approximately 85% and significantly diluting existing stockholders.

MPower formed a special committee of independent, disinterested directors with independent legal and financial advisors. Over the objection of stockholders holding more than 50% of MPower’s stock — who demanded a vote — the special committee approved the deal without one. Stockholders holding approximately 30% of MPower’s stock sued for breach of fiduciary duty and aiding and abetting.

The Court’s Decision

Revlon Does Not Apply to PBC Directors. The Court drew a critical distinction between Revlon as a standard of conduct and as a standard of review. As a standard of conduct, Revlon’s singular focus on price maximization is incompatible with Section 365(a) of the DGCL, which requires PBC directors to balance stockholder pecuniary interests, stakeholder interests, and the corporation’s stated public benefit. The Court left open whether a form of enhanced scrutiny — “PBC enhanced scrutiny” — may still apply as a standard of review.

Section 365(b) Safe Harbor Applied. The Court applied the Section 365(b) safe harbor, which shields PBC directors whose decisions are informed, disinterested, and not wasteful. Plaintiffs conceded they could not plead gross negligence, and, even under enhanced scrutiny, failed to show the special committee’s process was unreasonable. No waste was pled; instead, the company received urgently needed financing.

Aiding and Abetting Claim Also Dismissed. Without a predicate fiduciary breach, the aiding and abetting claim against the Funds failed as well. Notably, the Court observed that Section 365(b)’s language (“deemed to satisfy fiduciary duties”) is broader than Section 144’s language, meaning the safe harbor extinguishes aiding and abetting claims — not just direct fiduciary duty claims.

Key Takeaways

• Revlon’s price-maximization duty does not apply to PBC directors. PBC boards must balance all three Section 365(a) interests — not just stockholder returns.
• “PBC enhanced scrutiny” may still apply as a standard of review in change-of-control transactions. PBC boards should proceed with caution until this question is definitively resolved.
• Section 365(b) is a powerful shield. An informed, disinterested decision that does not constitute waste satisfies fiduciary duties — and can defeat both direct and aiding-and-abetting claims.
• Document the balancing. PBC boards should create a clear record of how they weighed all three Section 365(a) interests — failing to do so was a key vulnerability for the plaintiffs here.
• Independent special committees with independent advisors remain critical. They bolster the Section 365(b) defense and support a finding that the decision was informed.