Delaware Court Confirms: PBC Directors Need Not Maximize Shareholder Value

By Daniel DeWolf and Neelam Karamchandani

September 15, 2026

On July 29, 2026, the Delaware Court of Chancery, in Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., issued the first judicial opinion interpreting the fiduciary duties of PBC directors in change-of-control transactions. The Court held that the traditional Revlon duty to maximize shareholder value does not apply to PBCs. Instead, PBC directors must balance stockholders’ financial interests against the best interests of stakeholders affected by their conduct, and the public-benefit considerations outlined in the corporation’s certificate of incorporation (charter)—and they receive statutory safe-harbor protection when they act in an informed, disinterested manner and avoid waste. For founders considering a PBC rather than a traditional corporation, the decision offers both reassurance and a practical roadmap.

What Is a PBC?

A public benefit corporation (PBC) is a for-profit Delaware corporation that commits in its charter to pursuing one or more stated public benefits alongside returns for stockholders. Unlike a traditional corporation, a PBC is governed by Section 365(a) of the Delaware General Corporation Law (DGCL), which requires directors to balance three interests: (1) stockholders’ financial returns, (2) people materially affected by the company’s conduct, and (3) the specific public benefit stated in the charter. Section 365(b) provides a “safe harbor”: directors are deemed to have satisfied their duties if they make an informed decision, are disinterested (free of conflicts), and choose an outcome that is not so unreasonable that no person of sound judgment would approve.

What Happened in Drakes Landing?

MPower Financing is a Delaware PBC providing student loans to international students. Facing a January 2025 deadline to comply with its debt covenants, MPower accepted a last-minute financing proposal from two major lenders, Tilden Park and King Street, which collectively held nearly $109 million of its debt. The deal provided $20 million in new financing in exchange for the lenders’ right to convert approximately $109 million of debt into equity at roughly $2.25 per share—a steep discount from MPower’s last valuation of $15.50 per share in 2021. The full conversion gave the lenders approximately 85% ownership, constituting a change of control. A three-member special committee of disinterested directors, supported by independent legal counsel and a financial advisor, approved the transaction without a stockholder vote. Minority stockholders sued, alleging that the directors breached their fiduciary duty by failing to maximize shareholder value.

What the Court Held

No duty to maximize shareholder value. The Court held that the traditional Revlon mandate—requiring directors to get the best price for stockholders in a change-of-control transaction—does not apply to PBC directors. A single-minded focus on price would conflict with Section 365(a), which requires directors to balance multiple interests.

“PBC enhanced scrutiny” may still apply. The Court acknowledged that some form of heightened judicial review may still apply to PBC change-of-control transactions, reviewing whether the board’s balancing was reasonable. It did not resolve that question because the statutory safe harbor was dispositive.

The Section 365(b) safe harbor protected the directors. The Court found that the Plaintiffs failed to plead facts supporting a reasonable inference that Defendants did not satisfy the requirements of the safe harbor. There were no facts alleged that the special committee was uninformed, interested, or it committed waste. Plaintiffs conceded that the special committee members were disinterested and independent, and in its review of whether Defendants were informed, the Court found that the Plaintiffs failed to plead facts supporting an inference that the special committee breached their duty of care in informing themselves when balancing the three interests of 365(a) under both the gross negligence standard of the business judgment rule and the reasonableness standard of enhanced scrutiny. Plaintiffs’ complaint challenged only their pecuniary interests—whether the committee could have found a better price—not the stakeholder or public-benefit interests the committee is also required to balance.

Key Takeaways for Founders and Directors

·         Deciding between a traditional corporation and a PBC.

o   Fiduciary Duties. Directors of a corporation that is not a PBC are required to weigh only the pecuniary interests of the company’s stockholders when making decisions. In comparison, the directors of PBCs are weighing stockholders’ interests with its stated public benefits and other stakeholders. This broader mandate can affect how investors evaluate the company, so founders should be prepared to explain how the PBC structure aligns with their capital-raising strategy.

·         PBCs offer real flexibility in M&A. A PBC board is not obligated to accept the highest bid if doing so would undermine the company’s mission or harm other stakeholders. This is a meaningful structural advantage for founders who want to protect their company’s purpose through a sale or financing.

·         But flexibility requires documentation. The safe harbor protects directors only if their decisions are informed and disinterested. In practice, boards should build a contemporaneous record—in minutes, resolutions, and advisor mandates—showing they considered all three statutory interests, not just price.

·         Open questions remain. The Court expressly left unresolved what “PBC enhanced scrutiny” should look like. Future cases may impose a reasonableness test on how directors balance competing interests, so founders and boards should not assume the safe harbor is self-executing; process protections remain essential.