The ''corporate opportunity'' doctrine is the legal principle providing that directors, officers, and controlling shareholders of a

corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

must not take for themselves any business opportunity that could benefit the corporation. The corporate opportunity doctrine is one application of the

fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (legal person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, ...

duty of loyalty.

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 themself. When the corporate opportunity doctrine applies, the corporation is entitled to all profits earned by the fiduciary from the transaction. In the leading

English law English law is the common law list of national legal systems, legal system of England and Wales, comprising mainly English criminal law, criminal law and Civil law (common law), civil law, each branch having its own Courts of England and Wales, ...

case of it was held that "The rule of equity which insists on those who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of ''

bona fide In human interactions, good faith () is a sincere intention to be fair, open, and honest, regardless of the outcome of the interaction. Some Latin phrases have lost their literal meaning over centuries, but that is not the case with , which is ...

s'' ... or whether the plaintiff has in fact been damaged or benefited by his action."

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 The Delaware Court of Chancery is a court of equity in the U.S. state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court. Since 2018, the court consists of seven judges. The cour ...

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 , Latin for , is a term with several different, but related meanings. Legal use In the legal system in the United States, is used to indicate that a judicial proceeding may not have formally designated adverse parties or is otherwise uncontes ...

eBay, Inc. Shareholders Litigation'', investing in various

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

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.18B Am. Jur. 2d ''Corporations'' § 1542 (1964).

References

{{Aspects of corporations Legal doctrines and principles Corporate law

Application

Elements

See also

References