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Copyright 1989 University of Chicago.

University of Chicago Law Review

COMMENT: The Corporate Opportunity Doctrine and Outside Business Interests.

SPRING, 1989

56 U. Chi. L. Rev. 827


Michael Begert +


When a patient approaches a doctor in a medical corporation, the doctor may not treat the patient outside of the corporate clinic and keep the proceeds for herself. Such conduct is forbidden by the corporate opportunity doctrine: that body of law that prohibits corporate fiduciaries from diverting business opportunities from their corporations to themselves. By contrast, the corporation surely cannot complain if the doctor maintains a portfolio of publicly traded securities for her own profit. Such trading would not amount to a breach of the fiduciary's duties under the corporate opportunity doctrine. Between these two extremes lie countless instances in which actions of corporate participants fall on the uncertain line separating acceptable personal business undertakings from disloyalty to the corporation.

This uncertainty has produced a confusion of approaches to corporate opportunity in the state courts. 1 To remedy this situation, the American Law Institute ("ALI") has included a reformulation of the corporate opportunity doctrine in its corporate governance project. 2 The ALI rule, as tentatively drafted, would require that corporate participants fully disclose and obtain a formal rejection of outside business opportunities before taking advantage of such opportunities as individuals.

This comment argues for a doctrine of corporate opportunity that is more organized than under the common law, but more lenient than under the ALI reformulation. Section I of the comment sets out the various factors that courts use in enforcing the doctrine, and critiques the common law tests that attempt to synthesize these factors. Section II explains the ...
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