Corporate Opportunity Doctrine

Remember that directors have an obligation to act in the best interests of the corporation.  However, that charge can sometimes be difficult for even well-meaning directors to operationalize. For example, directors are often experienced business-people with their own relationships and their own business ventures. A common challenge facing directors comes in the form of business opportunities that come to them while they are directors. Which of the opportunities that come to directors properly belong to the corporation and which of them properly belongs to the director can be a vexing question.

If the director gets the answer to that question wrong, she may well find herself on the wrong end of a lawsuit alleging violations of the duty of loyalty for wrongfully benefitting from an opportunity that properly belonged to the corporation. On the other hand, the director may also mistakenly forego personal business opportunities for fear that her duty to the corporation prohibited her from pursuing them.

The corporate opportunity doctrine provides directors an affirmative defense to claims against them for taking a corporate opportunity. If a director can establish that the opportunity offered her was not properly an opportunity for the corporation, then the court will deem the director to have dealt fairly with the corporation.