enhanced scrutiny test
In corporate law, the enhanced scrutiny test (also known as the Unocal Test) was established in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985). In this decision, the Delaware Supreme Court created a heightened standard of judicial review for defensive measures adopted by a corporation’s board of directors in response to a takeover attempt. The test determines whether the business judgment rule will apply to the board’s actions.
The test has two prongs:
- Reasonableness: The board must show that it had reasonable grounds for believing that a danger to corporate policy and effectiveness existed, supported by a good-faith investigation and reliance on expert advice.
- Proportionality: The board must demonstrate that its defensive response was reasonable and proportionate to the perceived threat, and not coercive or preclusive of shareholder choice.
If both prongs are satisfied, then the board’s actions are protected under the business judgment rule, meaning that courts will defer to the board’s decision-making. If not, the board’s actions are subject to stricter judicial review.
In constitutional law, the term "enhanced scrutiny" refers to intermediate scrutiny, a judicial standard used to evaluate whether a statute or government action is substantially related to an important governmental objective. It occupies a middle position between strict scrutiny and rational basis review in constitutional analysis.
[Last reviewed in October of 2025 by the Wex Definitions Team]
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