Arizona Attorney Discusses The Duty of Directors and Officers
The Duty of Directors and Officers Regarding Corporate Opportunities
When can a corporate officer take a corporate opportunity for his own benefit?
People who become corporate officers or directors assume important legal duties to the shareholders of the corporation. One specific duty that an officer or director owes to shareholders is not to personally take corporate or business opportunities that could otherwise benefit the corporation.
For example, assume that you are the CEO of a corporation that sells glass windows and you find a new glass provider that is cheaper than the one the corporation currently uses. If you use the new glass provider for your own personal gain, you are taking the corporate opportunity. If the corporation sues, you could be liable to the corporation for any damages that resulted from you taking the opportunity.
To determine if a corporate officer or director has breached his or her duty toward shareholders by taking advantage of a corporate opportunity, some of the questions the court or the corporate counsel And corporate Law Attorneys in Arizona may ask are:
- Was this opportunity within the corporation’s line of business?
- Is it reasonably expected that the business would be interested in the opportunity?
- Could the corporation have afforded it?
- Would the corporation have taken advantage of the opportunity?
It is possible for a director or officer to take personal advantage of a corporate opportunity—if it’s done properly. The officer or director must disclose the opportunity to the corporation, and the corporation decided not to pursue it. It is important that the disclosure was full and fair. In short, the director or officer has to give the corporation a fair chance to take advantage of the opportunity.
Directors and officers in this type of situation can face personal liability if they do not follow the law carefully. A knowledgeable business attorney can explain whether a particular situation counts as a corporate opportunity, and how the director or officer should proceed if he or she wants to take personal advantage of such an opportunity. A business attorney, such as the ones at Gunderson, Denton & Peterson, PC can also advise a corporation if one of its directors or officers has improperly taken a corporate opportunity.