Corporate Opportunity Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Corporate Opportunity, written in plain English, along with examples of how it is used.
What is Corporate Opportunity?
It is an oppurtunity in business that a corporate is aware of and working on taking advanatge of such oppurtunity. It is usually known to higher management like directors, who has a duty not to disclose to anyone outside company which may harm the business and lead to leakage of company plans. The corporates have right to file a case against such individuals in their organisation for using such information of coprporation oppurtunities against the companies benefit.
History and Meaning of Corporate Opportunity
Corporate opportunity is a legal term used to describe the situations where directors or executives of a company decide not to pursue an opportunity presented to them, and instead see it as a personal opportunity to which they can invest or solicit on their own. This term commonly refers to a situation where a director or executive of one company comes across an opportunity that may be profitable for their organization, but instead chooses to take the opportunity for their own personal gain.
The concept of corporate opportunity has its roots in the fiduciary duties that directors owe their companies. Directors are obligated to act in good faith and in the best interest of their company. The law considers any business opportunity as belonging to the corporation, and under the employment of the corporation, directors are expected to act solely in the best interests of the corporation, and not in their own self-interest.
Examples of Corporate Opportunity
A board member of a tech company hears of an emerging startup that could align perfectly with their current business model. Instead of offering that opportunity to the company, the board member launches their own startup based on the same model, diverting potential revenue from the tech company.
A company receives a proposal from a potential supplier offering favorable terms for a product they already sell. Rather than presenting the proposal to the company, an executive or manager secretly establishes a new company, using the favorable terms to fill their own pockets rather than benefitting the company.
An executive uses their position of considerable influence at the company and knowledge of the industry to launch a similar enterprise without notifying the company. This move siphons resources from the employer and violates his duty of loyalty to them.
Legal Terms Similar to Corporate Opportunity
Fiduciary duty: The legal obligation of one party to act solely in the interest of another party. This could be applied in corporate settings for example to the duties which board members owe to their organizations.
Conflict of interest: A situation in which a person or organization is involved in multiple interests, and there chances of discord or conflict between those interests.
Insider dealing: Insider dealing is the illegal practice of trading on a stock exchange to one's own advantage through having access to confidential information.