Define: Revlon Rule

The Revlon Rule is a legal principle that arose from the landmark case Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. in 1986. It requires corporate boards, when a company is for sale, to prioritize the maximization of shareholder value over other corporate objectives. This rule compels directors to actively seek the best available price for the company when a change of control is imminent, often in the context of a merger or acquisition. The Revlon Rule imposes heightened scrutiny on board decisions and mandates that directors act in the best interests of shareholders during the sale process.

A requirement that the board of directors of a company act in the best interests of shareholders if the company is to be sold. The rule originated as the result of a court case involving the sale of Revlon Inc. in 1985. The court ruled that the directors of the company improperly resisted a hostile takeover and accepted a lower bid from another company.

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This glossary post was last updated: 29th March 2024.