Practical Law Glossary Item 0-383-6380 (Approx. 3 pages)
Corporate Opportunity Doctrine
A legal principle that prohibits an officer or director of a corporation from diverting a business opportunity presented to, or otherwise rightfully belonging to, the corporation to himself or any of his affiliates. This doctrine derives from an officer's or director's duty of loyalty to the corporation. Similarly, in a joint-venture context, one member of the venture owes a fiduciary duty to the other to not usurp corporate opportunities that rightfully belong to the joint venture (see, for example, J. Leo Johnson, Inc. v. Carmer, 156 A.2d 499 (Del. 1959)).
Courts analyze several factors to determine whether something is a corporate opportunity. In Delaware, these factors include:
Whether the corporation would be financially able to take the opportunity.
If the opportunity is in the same line of business as the corporation.
Whether the corporation has an interest or expectancy in the opportunity.
Whether taking the opportunity would create a conflict of interest or be a breach of fiduciary duties for the officer or director.
Regarding the first element, under Delaware law, even if the harmed corporation cannot establish its financial capability to have exploited the opportunity, the element will be met if the usurping party had a parallel contractual obligation to present corporate opportunities to the corporation (Yiannatsis v. Stephanis ex rel. Sterianou, 653 A.2d 275, 279 (Del. 1995)).