Legal definition of corporate opportunity
Commercial Legal Terminology

corporate opportunity

Corporate opportunity is the legal concept that prevents directors and officers of a corporation from appropriating certain business opportunities for their personal gain. As an employee, directors and officers of a corporation owe a fiduciary duty to the company (perhaps the highest level of duty imposed by law), the fiduciary can not take for him/her a business opportunity that should be reported and given to the company first. If a company does not want to take a business opportunity, then it can be used by a corporate officer individually.
But how to identify if a corporate opportunity was usurped, or, another word, an officer was involved in self-dealing?
The court has to consider the following relevant factors: (1) Is the corporation financially able to take the opportunity? (2) Is the opportunity in the corporation’s line of business? (3) Does the corporation have an interest or expectancy in the opportunity? (4) Does an officer or director create a conflict between his self-interest and that of the corporation by taking the opportunity for himself?
One of the well known cases on the corporate opportunity doctrine is Guth v. Loft. (1939 ), or Coca-Cola case. The facts were as follows: Charles Guth, President of Coca Cola beverage bottler Loft Inc., obtained the Pepsi Cola trademark and formula individually. Guth then secretly used Loft’s resources to develop, manufacture and distribute Pepsi. The Delaware Supreme Court concluded that the opportunity to acquire the Pepsi trademark and formula belonged to Loft and that Guth violated his fiduciary duty to Loft by taking the opportunity for himself.
Another example: Meinhard and Salmon formed a joint venture to lease an office building. Shortly before expiration of the lease, Salmon began secret negotiations with the lessor, as a result of which Salmon’s real estate corporation was able to lease the building and several adjoining lots. Salmon planned to eventually replace the existing building with a new and considerably more profitable facility. Meinhard did not learn of Salmon’s new arrangement until after the new lease was finalized. At that time he demanded that the new lease be held in trust for the joint venture. Salmon refused and the lawsuit ensued. (Meinhard v. Salmon, 164 N.E. 545, 546)
Find a legal term by clicking on the first letter of a legal word or phrase:
Book of the Day in our Store
Share it on TwitterFacebook
File Clerk/General Clerk 9th ed (Arco Civil Service Test Tutor)File Clerk/General Clerk 9th ed (Arco Civil Service Test Tutor)
by Arco
from $5.75
Old Whiskey and Young Women: American True Crime: Tales of Murder, Sex and ScandalOld Whiskey and Young Women: American True Crime: Tales of Murder, Sex and Scandal
by R. Marc Kantrowitz
  • List Price: $28.95
  • Price: $24.42
  • You Save: $4.53 (16%)
from $7.49
Russell J HansenAttorney at LawPRACTICE AREA: Real Estate Law, Wills & Probate, Business Law, Trusts & Estate Planning, Litigation, Industrial Development Law
Hunter B CraigAttorney at LawPRACTICE AREA: Real Estate Law, Wills & Probate, Business Law, Trusts & Estate Planning, Industrial Development Law
Neil J VerbruggeAttorney at LawPRACTICE AREA: Real Estate Law, Bankruptcy Law, Business Law, Industrial Development Law
New Jersey Law JournalRonald Coleman, a partner at Archer, has been a devoted and prolific writer for numerous years, but it was his blog, as reported not long ago by sibling publication The National Law Journal, that led him to a pro bono case that's now pending decision ... more »
Los Angeles TimesSigned into law by President George H. W. Bush in 1990, the ADA banned employment discrimination against the disabled and eliminated unnecessary physical barriers to commercial and government buildings. But in the quarter-century ... So far, Web ... more »
The AdvocateSix weeks later, local defense lawyers who specialize in white-collar crime are circling in the water, fielding calls from former bank officials and others affected by First NBC Bank's sudden collapse. But behind the scenes, federal auditors are ... more »
It's a free online legal dictionary search engine for definitions of legal terminology and legal words, legal abbreviations, and legal jargon you may meet when reading legal acts, law books, documents, legal forms and other legal content