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)
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