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What is a Corporate Opportunity?

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  • Written By: Alexis W.
  • Edited By: Heather Bailey
  • Last Modified Date: 23 September 2017
  • Copyright Protected:
    2003-2017
    Conjecture Corporation
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Corporate opportunity is a legal concept that suggests that a given opportunity or deal belongs to a company or corporation. The legal concept arises when an employee, especially a highly ranked employee such as a CEO, takes business away from his corporation. Taking a corporate opportunity can be grounds for legal action, including a lawsuit and divestment of all earned compensation.

When an employee works for a company, he may be privy to a lot of different information. He may obtain client lists, meet clients and interact with them. He may also find out about deals that are going to occur or about the company's business plans.

As a result of the special knowledge an employee has, the law imposes special legal duties upon him. These duties stem from the agent/agency relationship that implicitly exists in all employment law relationships. Although employees within the United States are at-will employees, which means they can quit a job whenever they want to, these agency/agent rules impose some limitations on the type of behavior an employee can exhibit when it comes to his employer.

Under agency law, which derives from common law or judge made rules, an employee has a fiduciary duty to act in the best interests of his employer. A fiduciary duty is the highest type of duty. It means that the employee has an absolute obligation not to jeopardize his employer's interests or otherwise hinder his employer's interests in any way.

Agency law limits an employee's behavior in several ways. An employee cannot, for example, go to work and explicitly do something to jeopardize the employer's business, such as assaulting customers. This law also prohibits an agent from taking a corporate opportunity.

A corporate opportunity, specifically, is any deal or business opportunity that becomes available to the employee only through his relationship with the company. For example, an employee may work for a corporation that is buying a new building that has just come on the market. The employee may have only found out about the building, and about what a good deal it is, as a result of his relationship with the corporation. The employee cannot then go behind his employer's back and buy the building, doing the real estate deal on his own, since the opportunity to buy the building is a corporate opportunity.

Essentially, the doctrine is designed to ensure that the employee does not cut out his employer when he is acting as the "middle man" in a deal. If an employee takes an opportunity that should rightfully belong to his employer, the employer can sue and collect any money the employee made as a result of stealing the deal. The employer can also sue the employee for being an unfaithful servant and potentially recover wages and compensation paid to the employee.

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wrig2ba
Post 2

Does anyone know if there is a statue of limitations on corporate opportunity filings?

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