What Is The Corporate Business Opportunity Doctrine? |
The corporate opportunity doctrine, also known as the business opportunity doctrine is a legal principle that prohibits directors, managers, or employees of a particular company from privately exploiting an alternate opportunity or business that is directly related to (or in direct competition with) the current company’s business. With that being said, an individual may in fact exploit a related business opportunity or venture if it has first been offered to the entire company and the company as a whole has decided to be involved. In order to identify whether a specific business opportunity or venture actually qualifies as a subject under the business opportunity doctrine, it would have to have the following characteristics:
The new business venture or opportunity is directly in line (or in competition) with the current business of the initial company. Your current company has the necessary and financial resources to undertake and exploit the new business; The company has a stake in, is expected to profit from, or could potentially be negatively affected by the new business.
The Business Opportunity Doctrine Is Actually More Common Than You Think
This rule is actually quite common and is religiously adhered to by big companies and corporations. This doctrine is actually embedded in most company and corporate policies. Many entrepreneurs, small business owners, and investors wonder if this also applies to small businesses or investments.
The doctrine does in fact also apply to small businesses as well. A number of legal decisions and rulings have shown that any businesses (regardless of size) is in fact covered by the business opportunity doctrine. Now, it goes without saying that by using one’s own company authority to gain or manipulate information for personal profit in a separate business venture is against all ethical standards in the professional business world/community.
Now, there might be some ambiguity when this rule is applied to small businesses. Often times, there is a lack of interest from the larger company when it comes to evaluating a current employee’s small business activities and whether they are actually related to the larger companies activities. Because most small businesses ventures fail, the undertaking of a related business by a stakeholder or employee of a particular the company may be viewed as a complimentary activity or beneficial to the operations of the larger company.
In some cases, the corporate business opportunity doctrine can be seen as a rule of disclosure. A corporate director or CEO is not prohibited against undertaking an alternate business venture directly related to the CEO’s current company business field. It is however important that full disclosure of the outside business opportunity or venture be made to the entire company or corporation. Even if the entire company is uninterested in pursuing the new opportunity, the director (or CEO) still has the authority to move forward with pursuing the new opportunity or not. To learn more about the business opportunity doctrine or starting your own business see, The Business Success Blueprint
Edward Rosenberg is a professional business and marketing expert. He has studied, researched, and implemented dozens of various marketing methods for several businesses over the past 5 years. To find out more about Edward, Click Here
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