Corporate Opportunity Doctrine
A fiduciary duty rule barring an officer or director from personally taking a business opportunity that rightfully belongs to the corporation.
The corporate opportunity doctrine is an application of the duty of loyalty. It prohibits a director or officer from diverting a business opportunity to themselves, or to another company they control, when the opportunity is one the corporation would reasonably be expected to pursue given its existing line of business, financial capacity, and interest. The fiduciary is generally expected to present the opportunity to the corporation first and let it decide.
Courts typically weigh factors such as whether the corporation had the financial ability to take the opportunity, whether the opportunity falls within the company's existing or reasonably expected line of business, whether the corporation has an actual interest or expectancy in it, and whether pursuing it personally would create a conflict with the fiduciary's duties. A fiduciary who properly discloses the opportunity and is rejected by a disinterested board can generally pursue it personally without liability.
Because the doctrine turns on several independent factors that each admit of degree — how close the opportunity is to the company's existing business, how clearly it was disclosed — Juricratic models a corporate opportunity claim as a weighted composite of those factor-level dials rather than a single up-or-down judgment, so a user can see which factor is actually driving the case's exposure.
How it actually shows up
Plaintiffs use the corporate opportunity doctrine to claw back profits an insider made from a deal that should have gone to the company, seeking disgorgement or a constructive trust over the diverted opportunity. Fiduciaries and their counsel build a defense around documented disclosure to the board and a genuine, informed rejection of the opportunity before it was pursued personally.
- What is the corporate opportunity doctrine?
- It is a fiduciary duty rule that bars a director or officer from personally taking a business opportunity that properly belongs to the corporation, without first offering it to the company.
- What factors determine if something is a corporate opportunity?
- Courts commonly look at whether the corporation could financially undertake the opportunity, whether it fits the company's existing or expected line of business, whether the company has an interest or expectancy in it, and whether the fiduciary's personal pursuit creates a conflict.
- Can a director take an opportunity after disclosing it to the company?
- Generally yes — if the director fully discloses the opportunity and a disinterested board or shareholder body declines it, the director can usually pursue it personally without violating the doctrine.
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