Corporate Opportunity Standards

Under the case-law regime, the corporate opportunity is one of the important subjects in the corporate laws. In principles, the corporate opportunity is deemed to be the property of a company, and taking advantage of which by its Directors is consider violation of their Duty of Loyalty. Bearing the Duty of Loyalty, a Directors as the trustee of the company should not take possession of the right or property of the company, or take advantage of the opportunity expected by or ought to belong to the company. Otherwise, such a Directors will be deemed to have unlawfully procured the corporate opportunity,which may lead to the company's claim for return of his interests obtained therefrom. By now, as far as the corporate opportunity is concerned, a mature system of rules named as the Corporate Opportunity Doctrine has been formulated under the case-law regime. These rules cover the issues such as recognition, prohibition and use of the corporate opportunity. From the author's point of view, the key of the Corporate Opportunity Doctrine is the recognition and identification of the corporate opportunity. As the essence of the Corporate Opportunity Doctrine, it is also difficult to recognize a certain opportunity to belong to a company rather than its Directors, and the use of which violates the Directors's Duty of Loyalty. Logically speaking, to make said recognition, there needs to be a start. This Article will focus and mainly discuss on said start, i.e., the standard for recognition of the corporate opportunity. In the corporate laws under the case-law regime, there are the three major standards for recognition of the corporate opportunity: the Interest or Exepectancy Test, the Line of business and the Fairness test. Playing important roles in recognition of the corporate opportunity, these three standards are much valuable for this Article. In this article, it is the author's opinion that in the information-exploded and globalized modern society full of competitions, information and opportunity are critical to the development of a company. For a company, obtaining the business opportunity is equal to holding tight of its fortune. In market with more and more competitions, it is an unusual scenario that a Directors unlawfully procures the corporate opportunity. Therefore, it may be necessary to introduce the Corporate Opportunity Doctrine into our legal system by reference of the legal frame of other developed counties,so as tobetter protect the interest of the companies and the shareholders. This Article consists of Introduction,Context and Conclusion. The structure of theContext is that: The Chapter One is the brief of the history of the Corporate Opportunity DoctrineThis chapter will introduce the appearance and development of the CorporateOpportunity Doctrine in the case-law counties, as well as the situation that theCorporate Opportunity Doctrine was introduced into the continental counties, such aGerman and Japan. The Chapter Two is the analysis on the legal basis of the corporate opportunityBased on the theory of entrust laws, this chapter addresses the relationship between acompany and its Directors and the necessity of the Directors's Duty of Loyalty. Furthethe nature of the corporate opportunity, as well as its position and importance in thesystem of the Directors's Duty of Loyalty are explained. The Chapter Three focus on the standard for recognition of the corporateopportunity, which is the core of this Article. Upon description of the standards in thecase-law counties, the author will analyze the factors to be considered in saidrecognition. Further, the author will raise its opinion that recognition of the ownershipof the corporate opportunity should be based on the purpose of use, the holder thereofand the relation between the corporate opportunity and the company's businesoperation. The Chapter Four is the discussion on use of the corporate opportunity. The authowill analyze on non-determined opportunity, waived opportunity and non-performingopportunity, aiming at uniting the convenien...