Delaware Court Rules PBC Boards Don’t Owe Revlon Duties: What MPower Financing Means for Anthropic, OpenAI and xAI

Last Updated: August 11, 2026

Gibson Dunn reported on July 31, 2026 that the Delaware Court of Chancery had, two days earlier, issued the first-ever written decision addressing public benefit corporation fiduciary duties in a change-of-control transaction. In Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., Vice Chancellor Nathan Cook ruled that the board of MPower Financing, PBC did not have to maximize stockholder value when it approved a dilutive debt-to-equity financing, because Delaware’s public benefit corporation statute displaces the traditional Revlon standard. The ruling lands as Anthropic, OpenAI, xAI, and dozens of other PBCs prepare for IPOs and high-stakes financings under a corporate form the courts had never actually tested.

What did the Delaware Court of Chancery decide about public benefit corporations?

The court held that directors of a Delaware public benefit corporation are not bound by Revlon‘s single-minded duty to seek the highest price for stockholders in a sale-of-control transaction, because Section 365(a) of the Delaware General Corporation Law (DGCL) requires them to balance stockholder, stakeholder, and public-benefit interests instead.

The case, Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P., C.A. No. 2025-0898-NAC, was decided on July 29, 2026. It is the first written opinion in which the Court of Chancery has directly analyzed how fiduciary duties operate for a PBC board facing a transaction that shifts control to existing lenders. Richards, Layton & Finger, which tracked the case on its Delaware corporate litigation blog, called it a decision “of first impression” on the interaction between the PBC statute and the court’s long-standing change-of-control jurisprudence.

What happened at MPower Financing that triggered the lawsuit?

MPower Financing, PBC, a lender focused on expanding international students’ access to U.S. postsecondary education, faced a debt-covenant deadline of January 31, 2025 and needed roughly $17 million in new capital to avoid default, according to the Gibson Dunn client alert published July 31, 2026.

Two existing lenders, including Tilden Park Capital Management, offered $20 million in new financing paired with an option to convert roughly $28.125 million in secured notes into equity at $2.25 per share, up from an initial $2.04 proposal and well below the $15.50 per-share price of MPower’s July 2021 financing round. If fully converted, the deal would lift the two lenders’ combined stake from about 25.5% of common stock to nearly 85%, while handing their designees seven board seats. The MPower board formed a three-member special committee of independent, disinterested directors in February 2025, which retained separate legal and financial advisors, tested the market for alternative bids into mid-March, and approved the transaction on March 28, 2025. Current and former stockholders sued in August 2025, arguing the deal breached the directors’ fiduciary duties and that the special committee should have run a full Revlon-style auction to maximize price.

Why does it matter that Revlon duties do not apply to PBC boards?

Revlon duties ordinarily force a board selling corporate control to seek the highest price reasonably available to stockholders, and courts subject those decisions to enhanced scrutiny. Vice Chancellor Cook held that standard is incompatible with the balancing mandate Delaware wrote into its public benefit corporation statute.

The opinion reasoned that DGCL Section 365(a) requires PBC directors to balance three distinct interests — the pecuniary interests of stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit stated in the charter — and that a singular focus on price maximization would override that statutory balancing test. As the Harvard Law School Forum on Corporate Governance summarized in its August 5, 2026 post by Wilson Sonsini Goodrich & Rosati attorneys Amy Simmerman, Ryan Greecher, and James Griffin-Stanco, this is the first time any Delaware court has provided direct guidance on how fiduciary principles apply to the PBC form, which has existed under Delaware law since 2013 but had never before been tested in a control transaction dispute.

How does the DGCL Section 365 safe harbor protect PBC directors?

Instead of applying enhanced Revlon scrutiny, the court applied the statutory safe harbor in DGCL Section 365(b), which shields PBC directors’ decisions so long as they are informed, disinterested, and not wasteful — a deferential standard closer to the traditional business judgment rule.

Because the plaintiffs conceded that the special committee’s three members were independent and disinterested, and because the committee ran a market check and obtained separate advisors, Richards, Layton & Finger noted that the court found the process met the safe harbor’s requirements and dismissed all fiduciary duty and aiding-and-abetting claims. Gibson Dunn’s alert also flagged that the ruling touches DGCL Section 367, the 2025 statutory reform setting a minimum ownership threshold — 2% of shares or $2 million in value for stockholders of a company whose shares are not listed on a national exchange — before a stockholder may bring certain derivative claims against a Delaware corporation, part of the broader legislative package Delaware adopted to keep companies from reincorporating elsewhere, a package that also included the Section 144 director-independence standard the Court of Chancery revisited earlier in 2026.

Why is this ruling especially significant for AI companies structured as PBCs?

The ruling directly affects governance risk at Anthropic, OpenAI Group, and xAI, all of which operate as Delaware public benefit corporations and are approaching financings, IPOs, or both, meaning their boards can now point to a real precedent instead of an untested statute when a deal draws stockholder litigation.

Anthropic filed a confidential draft registration statement on June 1, 2026 following a $65 billion Series H round that valued the company at $965 billion post-money, and it has operated as a PBC since its founding, with a Long-Term Benefit Trust holding the power to appoint a majority of its board. OpenAI converted its structure in 2025 so that the nonprofit OpenAI Foundation now controls OpenAI Group PBC while holding a 26% equity stake. Reed Smith’s summary of the Drakes Landing decision noted that boards at these companies, along with older PBCs such as Kickstarter, Vital Farms, and Allbirds, had been operating without any judicial guidance on how a control transaction should be evaluated — a gap this ruling now partially closes for any future sale, merger, or dilutive financing they undertake.

How does this decision fit into Delaware’s broader push to retain corporate charters?

Delaware has spent the past year defending its dominance as the preferred incorporation state against a wave of companies threatening to reincorporate elsewhere, and the Drakes Landing ruling adds judicial certainty to legislative fixes lawmakers already passed for that purpose.

The Delaware Supreme Court upheld the state’s SB 21 corporate-law reforms on March 2, 2026, according to Spotlight Delaware, rejecting a challenge to changes designed to counter what commentators dubbed the “DExit” movement — the trend of companies such as Tesla reincorporating outside Delaware after adverse Chancery rulings. By clarifying that PBC directors are not exposed to the same price-maximization liability as ordinary corporations in a sale process, the Court of Chancery has removed one source of uncertainty that critics said made Delaware a riskier jurisdiction for founders choosing a mission-driven corporate structure.

What have law firms told clients to do in response?

Multiple law firms issued client alerts within days of the opinion urging PBC boards to document their balancing analysis explicitly rather than defaulting to a stockholder-value-only record, since the safe harbor turns on whether the decision was informed and disinterested, not on whether stockholders received the highest available price.

Akerman’s analysis, published shortly after the ruling, said the decision “reinforces the power of statutory safe harbors” and advised PBC boards to lean on independent special committees with separate advisors whenever a transaction could be characterized as a change of control. Gibson Dunn’s Stephen Glover and Harrison Korn wrote that boards should expect plaintiffs to test the limits of the safe harbor in future cases and cautioned that the court left open the possibility of a modified “PBC enhanced scrutiny” standard in circumstances where a special committee process is less robust than the one MPower’s board used.

What should in-house counsel and PBC boards do now?

Legal and compliance teams at any Delaware public benefit corporation, or any company considering conversion to PBC status, should treat this ruling as the new baseline for evaluating deal process and board documentation, alongside the broader corporate law compliance resources covering Delaware’s ongoing statutory reforms.

• Form an independent special committee for any transaction that could be viewed as a sale of control, and confirm in writing that each member is disinterested and independent, since that finding was central to the safe harbor outcome in Drakes Landing.
• Retain separate legal and financial advisors for the special committee rather than relying on advisors also serving management or controlling stockholders.
• Document the Section 365(a) balancing analysis explicitly in board minutes — the specific public benefit at stake, the interests of affected stakeholders, and stockholders’ pecuniary interests — rather than a record built solely around price.
• Run a market check where feasible, even though price maximization is not the legal standard; MPower’s committee tested the market into mid-March 2025 before approving the transaction, and that process supported the court’s finding of good faith.
• Review governing charters against DGCL Section 367 to understand the new minimum-ownership thresholds for derivative standing, since that 2025 reform continues to shape which stockholders can bring fiduciary duty claims in the first place.
• Watch for appellate review or follow-on Chancery decisions, since law firms including Gibson Dunn and Richards, Layton & Finger have flagged that plaintiffs are likely to test the boundaries of the safe harbor and press for a distinct “PBC enhanced scrutiny” standard in cases with weaker special-committee records.

Boards that skip these steps risk losing the safe harbor’s protection entirely, since the ruling’s deference to MPower’s directors rested specifically on the strength of its special committee process, not on the PBC form alone.