The Corporate Opportunity Doctrine and outside Business Interests

Abstract

When a patient approaches a doctor in a medical corporation, the doctor may not treat the patient outside of the corporate clinic and keep the proceeds for herself. Such conduct is forbidden by the corporate opportunity doctrine: that body of law that prohibits corporate fiduciaries from diverting business opportunities from their corporations to themselves. By contrast, the corporation surely cannot complain if the doctor maintains a portfolio of publicly traded securities for her own profit. Such trading would not amount to a breach of the fiduciary's duties under the corporate opportunity doctrine. Between these two extremes lie countless instances in which actions of corporate participants fall on the uncertain line separating acceptable personal business undertakings from disloyalty to the corporation. This uncertainty has produced a confusion of approaches to corporate opportunity in the state courts.' To remedy this situation, the American Law Institute (ALI) has included a reformulation of the corporate opportunity doctrine in its corporate governance project.2 The ALI rule, as tentatively drafted, would require that corporate participants fully disclose and obtain a for-