What is the Revlon duty, and when does it apply in corporate takeovers?

• A. Directors must maximize shareholder value during a sale of control; applied when control of the company is at stake.
• B. Directors must minimize risk during any takeover; applied when a merger is contemplated.
• C. Directors must preserve current management; applied when there is a proxy contest.
• D. Directors must reject all takeovers; applied when there is a change in control.

Answer: (A)

When a takeover will result in a change of control, directors’ duties shift to maximizing the value of the sale for shareholders. This Revlon duty applies specifically in a sale of control scenario, meaning once control of the company is at stake, the board must act to obtain the best price and terms reasonably available for shareholders, and avoid actions that would undermine those value-maximizing objectives or entrench management. This is why the correct statement frames the duty as maximizing shareholder value during a sale of control and notes it applies when control is at stake. The other ideas don’t fit Revlon: the duty isn’t a general requirement to minimize risk in any takeover, it isn’t about preserving current management in a proxy contest, and it isn’t a blanket mandate to reject all takeovers.