Usurpation Of Corporate Opportunity, And Its Legal Regulation

Because of the expansion of modern corporations, the development of securities markets and the corporate equity holding splits, the power of corporate managers has greatly expanded. With corporate managers being the controllers of corporations, the Agency Problem has troubled the corporate governance in many countries including China. In order to prevent the managers from usurping corporate opportunities, the Corporate Opportunity Doctrine (hereinafter referred as COD) has been developed in common law. Although the usurpation of corporate opportunities has been a severe problem in China, COD is not fully discussed. Since it is an important problem that should be urgent for us to resolve, the author chooses this theme as academic dissertation. Based on analyzing the theory and institution construction of COD in common law, comparing it with the situation in China, the dissertation is trying to give some advice to the legislation of our country.In addition to introduction and conclusion, the dissertation consists of three parts, i.e., an outline of COD, institutional frame of COD, and the connotation of COD to our country, which respectively aim at explaining COD by why, what and how.Part one, an outline of COD. This part gives a survey of COD through a leading case in English company law. Then, it tries to prove the necessity of COD, adopting the research approach of combining economics and law science. Because of the separation of ownership and control in modem corporations and different goals between managers and stockholders, the Agency Problem is inevitable as well as usurpation of corporate opportunities. On the other hand, the duty of not to usurp corporate opportunities could be proved through the theories of agency and trust for the relationship between managers and stockholders. Actually, there is a fiduciary relationship between them. The duty of loyalty prevents managers from usurping the opportunities of corporations.Part two, institutional frame of COD. This part drives at answering what is COD. The author points out that directors, officers and controlling shareholders should bear the duty of not to usurp corporation opportunities. Then, some testsin American case law to determine a corporate opportunity are discussed. For the legal relief of the usurpation, there is an introduction to the theories of unjust enrichment and constructive trust. Finally, some defenses are offered to managers, but they are not absolute.Part three, the connotation of COD to our country. This part mostly discussed why we should adopt COD in China. First, we conclude that the problem of insider control has been urgent to resolve in China. Then the author points out that we haven't an efficient institution to prevent the usurpation of corporation opportunities after the comparison between COD and non-competing system in China. After analyzing the relevant legislation in Germany, Japan and Korea, the author tries to prove the legal basis of COD in China through the theories of duty of loyalty and good-faith principle. The author holds strongly that COD should be introduced into our country, and by the way the author gives some pieces of advice on corporate legislation of our country.