Define: Corporate Opportunity

A corporate opportunity refers to any business opportunity that arises during the course of a company’s operations and is within its line of business or reasonably related to its current or future activities.

The duty of loyalty requires directors, officers, and employees of a company to act in the best interests of the company and not to personally exploit or divert corporate opportunities for their own benefit.

Directors or officers may pursue a corporate opportunity if they first disclose it to the company and obtain the company’s informed consent. This ensures that the company has the opportunity to evaluate and decide whether to pursue the opportunity itself.

If a director or officer fails to disclose a corporate opportunity and instead personally pursues it, they may be in breach of their duty of loyalty. The company may have legal recourse to recover any profits made from the opportunity or seek other remedies.

Employees generally do not owe the same fiduciary duties as directors or officers. However, if an employee uses confidential information or resources of the company to personally pursue a corporate opportunity, they may be in breach of their employment contract or face other legal consequences.

Companies can establish clear policies and procedures that require directors, officers, and employees to disclose any potential conflicts of interest and corporate opportunities. Regular training and monitoring can also help ensure compliance with these policies.

In some cases, a company may choose to waive its right to pursue a corporate opportunity. This can occur through a formal resolution or agreement, provided that the decision is made in the best interests of the company and with the informed consent of the shareholders.

Courts typically consider factors such as the nature of the opportunity, whether it was presented to the company, the company’s ability to pursue the opportunity, and whether the opportunity is within the company’s line of business or reasonably related to its activities.

Shareholders may have the right to bring legal action if they believe a corporate opportunity was wrongfully taken by directors, officers, or employees. They can seek remedies such as damages, injunctions, or the appointment of a receiver to protect the company’s interests.

There may be exceptions to the duty of loyalty, such as when a company explicitly waives its right to pursue a specific corporate opportunity or when a director or officer can demonstrate that the opportunity was not within the company’s line of business or reasonably related to its activities. However, these exceptions are subject to legal scrutiny and should be carefully evaluated.