A Study On Judicial Application Of Corporate Opportunity Doctrine

Corporate Opportunity Doctrine is a key issue in the common law corporation area about the legalregulation on directors’ damaging; the study of the theory had begun100years ago. China has introducedthe similar corporation opportunity rules in its Corporation Law revised in2005. This concept enhancedand intensified the directors and other managers’ duty of loyalty rule. Sourcing from other advancedcountries’ legislative experiences， it is a big great progress. However, an overview of the relevantProvisions reveals that there are still many problems in the specific application, the system has not yetformed a complete system. Therefore, this article attempts to explore a rule about the identification of thecorporate opportunity that fits into our national conditions by comprehensively using of various researchmethods and referencing the United States, Britain and other countries on the basis of legal theory.Theoretically, the root of the source of corporate opportunity doctrine is based on the directors andother managers’ fiduciary duties which determined by the separation of the company’s ownership andmanagement. The duty of loyalty is the most important type of fiduciary obligation. There are problems inthe legislative and judicial level, which affects the application of the rule to a certain extent，the mostdifficult and controversial points are corporate opportunity tests. The article does investigation and researchon the Corporate Opportunity Doctrine in the common law with aims to get the right tests that fits into ournational conditions. In this part, it summarizes up four elements, which are the element of subject, theelement of illegal acts, the element of damaged result and causal relationship. The director can onlyassume corresponding responsibility when the property loss cause by their unreasonable use ofopportunities. As for the scope of the main obligations, its including of directors and managers areappropriate.Aiming at uniting the convenience of use of the corporate opportunity and the Directors’ Duty ofLoyalty, directors and senior managers can reasonable use the company business opportunities without theneed to assume responsibility in the following circumstances: the company waived or can not use or beenrefused to deal with a third party company. At the same time it will stress that the legitimacy of theprocedure is the premise of the exceptions of corporate opportunity which can not deviate. The shareholders and the shareholders’ meeting is the approval authority according to the Corporate Law，whichhas many disadvantages in practice，We propose that the Board can be as a consent authority as well as theshareholders’ meeting. System of Voting Elimination should be introduced in the meeting when thedirectors and the shareholders make decisions to vote for the use of the business Opportunities. Only in thisway can we avoid procedural injustice.Violation of Corporate Opportunity Doctrine will lead to some legal effects. If the manager usurpcorporate opportunity and gain illegal income, the company may exercise the right of Recovery. Moreover,the company could claim for disloyal manager as it suffers the loss. Shareholders can also lodge acomplaint if the operating agency is indolent in exercising their rights. As for the distribution of the burdenof proof, the traditional principles “he who asserts must prove” may not be able to protect the rights of thevictim’s because of the director’s dominant position in the company.It is recommended to take thecombination of traditional approach and the inverted responsibility in putting to the proof. The company isresponsible for the identity of the accused executives, encroachment of commercial opportunities andresulting property damage. Defendant is responsible to adduce evidence to prove that there is no causalrelationship between its utilization behavior and the company’s loss or to prove that utilization behavior isfair for the company.