When a company becomes a takeover target, its directors may be faced with the dilemma of whether or not they should recommend the offer to the shareholders.
The general assumption is that the directors' duty is exclusively to the company's shareholders and therefore their principal aim should be to get the best possible price.
But the ongoing battle for control of Manchester United between the football club's board and US sports tycoon Malcolm Glazer has proved that this view may be too simplistic.
As Lawyer2B went to press, Glazer was waiting for a response from United's board on his latest offer. But according to press reports, the board's response to the 800m proposal is expected to be entirely consistent with February's statement.
In a break from the norm, United's board, advised by Freshfields Bruckhaus Deringer partner Mark Rawlinson, said in February that Glazer's 300p per share offer was "fair" but was not in the best interests of the company, because it would impose undue financial strain on it.
The directors argued that Glazer's bid relied on too much debt and so could be financially risky if the club failed to win any cups and revenues dropped.
It is understood that Freshfields advised United's board that the company owes a duty of care not to the selling shareholders, but to the company itself. This broader interpretation takes into account the longer-term interests of the shareholders, as well as other stakeholders, including consumers, staff and the local community.
Theoretically, Glazer, who is being advised by Allen & Overy, can go directly to United's shareholders by launching a bid as long as he has the support of his financial backers. Indeed, if the board's response is neutral, that may be enough to satisfy Glazer's lenders.
But to stand any chance of success Glazer needs the backing of JP McManus and John Magnier, the Irish horseracing millionaires who own 29 per cent of United's shares.