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What is the Corporate Opportunity Doctrine?

BusinessPartner

Corporate directors, officers, and controlling shareholders owe duties to their company and to the minority shareholders. Under the corporate opportunity doctrine, these representatives are legally prohibited from taking for themselves any business opportunity that could reasonably benefit the corporation. This is one aspect of the fiduciary duties of a corporate officer, and it is included in the overall ‘duty of loyalty’ that corporate officials owe the company and its shareholders.

At Pike & Lustig, LLP, our West Palm Beach shareholders’ rights attorneys represent shareholders who sustained financial damage as a result of a manager or insider’s violation of their duties. This includes cases in which a corporate official violated the corporate opportunity doctrine. If you are a shareholder in South Florida, and you believe that your rights have been violated, you should consult with our legal team today.

Florida Law: The Corporate Opportunity Doctrine 

The Florida Business Corporation Act does not deal with corporate opportunity doctrine in a direct manner. However, the act does address a corporate director duty to avoid ‘conflicts of interest’. Florida courts have long recognized the fact that a corporate officer’s violation of the corporate opportunity doctrine could result in a serious conflict of interest. Under state law, corporate directors and managers should comply with the corporate opportunity doctrine. The failure to do so could be deemed a violation of the state’s rules against conflict of interest and it could potentially be ruled to be self-dealing.

What is a Corporate Opportunity?  

One of the things that makes this doctrine so difficult to apply to real-world situations is that the term ‘corporate opportunity’ can sometimes be hard to define. Florida courts have used the following three-part test to determine whether or not a corporate opportunity actually exists for the purposes of state law:

  1. Was the corporation in question logistically able to pursue the opportunity?
  2. Can the corporation establish a valid and significant purpose in the opportunity?
  3. Does the potential opportunity actually fit into the present activities of the corporation?

If the answer to all of those questions is ‘yes’, then the corporate opportunity doctrine is likely implicated. To put it another way, if an opportunity arises that is in the corporation’s ‘line of business’ and the corporation has the expertise and financial ability to pursue, corporate directors and officers should not take that business opportunity for themselves. The corporation that they control or represent should always have the primary option to undertake the business opportunity. Shareholders are inherently forced to put trust into directors and officers of their company. Corporate director’s need to act in good faith.

Contact Our South Florida Business Litigation Attorneys Today

At Pike & Lustig, LLP, our Florida shareholders’ rights lawyers have extensive experience handling claims related to the corporate opportunity doctrine. To find more about what we can do for you, please contact our law firm now for a free case evaluation. With offices in Miami and West Palm Beach, we represent shareholders throughout the region, including in Coral Springs, Fort Lauderdale, and Miramar.

Resource:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0607/0607.html

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