Corporate opportunity
Encyclopedia
The corporate opportunity doctrine is the legal principle providing that directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...

, officers, and controlling shareholders of a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

 must not take for themselves any business opportunity that could benefit the corporation. The corporate opportunity doctrine is one application of the fiduciary duty of loyalty
Duty of Loyalty
Duty of Loyalty is a term used in corporation law to describe a fiduciaries' "conflicts of interest and requires fiduciaries to put the corporation's interests ahead of their own." "Corporate fiduciaries breach their duty of loyalty when they divert corporate assets, opportunities, or information...

.

Application

The corporate opportunity doctrine does not apply to all fiduciaries of a corporation; rather, it is limited to directors, officers, and controlling shareholders. The doctrine applies regardless of whether the corporation is harmed by the transaction; indeed, it applies even if the corporation benefits from the transaction. The corporate opportunity doctrine only applies if the opportunity was not disclosed to the corporation. If the opportunity was disclosed to the board of directors and the board declined to take the opportunity for the corporation, the fiduciary may take the opportunity for him- or herself. When the corporate opportunity doctrine applies, the corporation is entitled to all profits earned by the fiduciary from the transaction.

Elements

A business opportunity is a corporate opportunity if the corporation is financially able to undertake the opportunity, the opportunity is within the corporation's line of business, and the corporation has an interest or expectancy in the opportunity. The Delaware Court of Chancery
Delaware Court of Chancery
The Delaware Court of Chancery is a court of equity in the American state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court.-Jurisdiction:...

 has stated, "An opportunity is within a corporation's line of business . . . if it is an activity as to which the corporation has fundamental knowledge, practical experience and ability to pursue." In In re eBay, Inc. Shareholders Litigation, investing in various securities was held to be in a line of business of eBay despite the fact that eBay's primary purpose is to provide an online auction platform. Investing was in a line of business of eBay because eBay "consistently invested a portion of its cash on hand in marketable securities." A corporation has an interest or expectancy in a business opportunity if the opportunity would further an established business policy of the corporation.
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