(Note: IANAL but I am, or have been, the founder or co-founder or director or board member of multiple Delaware-based corps). If the company is in distress, or

(Note: IANAL but I am, or have been, the founder or co-founder or director or board member of multiple Delaware-based corps). If the company is in distress, or a sale is considered inevitable, the main precedent often cited is Revlon: http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_Forbes_Holdings,_Inc http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_.... If a company is not in a distressed state (referred to as 'Revlon circumstances') then the directors not only have a responsibility to accept the higher price, but also have to weigh price above all other parameters and have an obligation to shop or auction the deal to find and establish the best market price. This falls under Smith: http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom Cases where a lower offer is accepted over a higher are very clear cut, most decisions are around having two equal offers, but where a decision is made against weighing up the future value and/or burden of any debt that makes up one of those buyout offers. ie. if you get two offers of $500M each, but one of those carries a debt burden, you must take that into consideration when making your decision. Also, any offers made to any directors in terms of future employment are a conflict of interest, and those directors or managers must be excused from the negotiation or must make the interest known to the board. The standard legal advice with Delaware companies is as follows (since most startups are based in Delaware, it is good to know this): "When it becomes clear that the target corporation will be sold, the board of directors of the target owes a fiduciary duty to the shareholders to obtain the best value reasonably available under the circumstances, and may even have a fiduciary duty to run a fair auction. The board cannot favor one bidder over another when both bidders are offering an adequate price." from: http://www.hogefenton.com/eblast_3-5-08.html http://www.hogefenton.com/eblast_3-5-08.html Other than Smith, there are plenty of cases where shareholders have sued and won after a company is sold and they feel that either the best price wasn't obtained, or that the directors had a conflict of interest (ie. they went on to gain employment with the acquirer at above-market/ridiculous terms - in effect a bribe for acquisition). If you have raised money, and you get an offer from a company where they will give you a small buyout but will offer you personally stock in their company and a great salary etc, you have to be careful because you may be neglecting your duty (Ron Conway mentioned last year that this was happening a lot with Facebook). Also related is the talk around the Parakey acquisition (though nobody sued, so no suggestion of any wrong-doing): http://techcrunch.com/2007/09/25/parakey-did-investors-get-left-out-in-the-cold/ http://techcrunch.com/2007/09/25/parakey-did-investors-get-l...