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LSDefine
Simple English definitions for legal terms
corporate opportunity
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A quick definition of corporate opportunity:
Corporate opportunity means that people who work for a company, like bosses and directors, have to be careful not to take away good business ideas from the company for their own benefit. They have to do what's best for the company, not just for themselves. Sometimes it's hard to know if something is a corporate opportunity or not, but if it's something the company could do and it's related to what the company does, then it's probably a corporate opportunity. People who work for the company have to be honest about any conflicts of interest they have and not try to hide anything. If they do something wrong, they can get in trouble.
A more thorough explanation:
Corporate opportunity refers to the responsibility of senior executives and directors of corporations to not take business opportunities away from the corporation for their own benefit. This means that executives should not use their position within the corporation to benefit themselves at the expense of the corporation.
For example, if a director of a company learns of a potential business opportunity that would be a good fit for the company, they cannot take advantage of that opportunity for their own personal gain. Instead, they must present the opportunity to the company and allow the company to decide whether or not to pursue it.
Courts use various factors to determine whether or not a director has taken advantage of a corporate opportunity. These factors include:
- Whether the corporation is financially able to pursue the opportunity
- Whether the opportunity is within the corporation's line of business
- Whether the corporation has an interest or expectancy in the opportunity
- Whether the director's actions are in conflict with their duties to the corporation
It is important for fiduciaries to be transparent about any conflicts of interest they may have and to recuse themselves from decision-making where necessary. Courts are more likely to be critical of fiduciaries who attempt to conceal their actions in order to take advantage of corporate opportunities.