Entrepreneurship, Second Edition

12.1. Leaving Your Present Position

Many enthusiastic entrepreneurs are so excited about where they're going that they forget to consider where they've been. They're surprised to learn that there may be serious limitations imposed upon their freedom of action arising out of their former employment. Some of these limitations may be the result of agreements signed by the entrepreneur while employed in her former position. Others may be imposed as a matter of law, without any agreement or even knowledge on the part of the employee.

12.1.1. Corporate Opportunity

The corporate opportunity doctrine is an outgrowth of the traditional obligation of loyalty owed by an agent to a principal. In its most common form, it prohibits an officer or director of a corporation, a partner in a partnership, or a person in a similar position from identifying a business opportunity that would be valuable to his company and using that information for his own benefit or the benefit of a competitor.

Thus, a corporate director who discovers that one of the corporation's competitors may shortly be put on the market cannot raise money and purchase the competitive company himself. In order to discharge his legal obligation to the corporation of which he is a director, he would be required to disclose the opportunity to his board and allow the board to decide (without his participation) whether the corporation will make the purchase. Only after the corporation has been fully informed and decided not to take ...