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Usurping Corporate Opportunities

Usurping Corporate Opportunities

With the ever-changing business landscape, the concept of usurping corporate opportunities has become a more prevalent issue in the world of corporate law. What do we mean when we talk about usurping corporate opportunities? At its core, usurping corporate opportunities refers to situations where an employee or officer of a company takes advantage of an opportunity that rightfully belongs to the company. In other words, the individual has diverted a corporate opportunity for their personal benefit or the benefit of another entity. 

As you can imagine, this concept can manifest in various forms, including using confidential information learned through their employment for personal gain, starting a competing business while still employed, or taking advantage of a business opportunity that should have been presented to the company first. In the state of New York, the law regarding usurping corporate opportunities is clear: employees and officers owe a fiduciary duty to their company, which requires them to act in the best interest of the company and not to take opportunities that rightfully belong to the company. The law also states that any opportunity that comes to an employee or officer as a result of their position or relationship with the company is presumed to belong to the company. 

One of the key challenges in this area of law is determining what constitutes a corporate opportunity versus an individual opportunity. Courts have established that a corporate opportunity must be in the same line of business or closely related to the company's existing business, and it must be one that the company has a reasonable interest in pursuing. For example, if a company is in the business of selling cars, an opportunity to sell boats would not be considered a corporate opportunity. If an employee or officer takes a corporate opportunity that rightfully belongs to the company, the company can take legal action against the individual for breach of fiduciary duty. As a result, the company may be entitled to damages or other remedies, including an injunction to prevent the individual from further taking advantage of corporate opportunities. 

In conclusion, usurping corporate opportunities is a serious issue that can have significant consequences for both the individual and the company involved. It is important for businesses to have clear policies and procedures in place to prevent employees and officers from taking advantage of corporate opportunities, and for individuals to understand their obligations under the law. As a law firm committed to upholding the highest standards of corporate law, we stand ready to assist our clients in navigating these complex issues. For more information on the topics covered here today, or for services related to your specific situation, contact our knowledgeable corporate governance attorneys at (212) 404-8644 or email to get the help you need.    



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