Corporate Opportunity Doctrine

Remember that directors have an obligation to act in the best interests of the corporation. However, that charge can sometimes be difficult for even well-meaning directors to operationalize. A common challenge facing corporate directors comes in the form of business opportunities that come to them while they are directors. Which of these opportunities properly belong to the corporation and which of them properly belongs to the director can be a vexing question.

One of the best known corporate opportunity examples is the old partnership case of Meinhard v. Salmon, in which one of two partners in a real estate venture, takes advantage of his position to invest in a property adjacent to the partnership's real estate venture. The question for the court was whether the partner violated his duty to the partnership by investing in the adjacent property rather than offering the investment opportunity to the partnership.

If a director invests in an opportunity that the director deems does not belong to the corporation, she may well find herself on the wrong end of a lawsuit alleging violations of the duty of loyalty for wrongfully benefitting from an opportunity that properly belonged to the corporation. On the other hand, the director may act conservatively and mistakenly forego personal business opportunities for fear that her duty to the corporation prohibited her from pursuing them.

The corporate opportunity doctrine provides directors an affirmative defense to claims against directors for taking a corporate opportunity. If a director can establish that the opportunity offered her was not properly an opportunity for the corporation, then the court will deem the director to have dealt fairly with the corporation.