When a business owner decides to reward an employee with stock ownership, the benevolent boss occasionally changes his mind when the corporation becomes extremely successful. When the majority owner gets greedy, he may try to minimize the value of the employee's stock by moving corporate assets or corporate opportunities into another company that is owned by him alone. Under the law, this diversion of value is referred to as "usurpation of corporate opportunity." This type of oppressive conduct can be difficult to trace and prove if the majority owner has used shell corporations or attempted to conceal the fact that he controls the new businesses.
The law holds that when a corporate officer (including one who is also a majority shareholder) becomes aware of a business opportunity by virtue of his position with the corporation, the officer has the duty to present that opportunity to the corporation, rather than seizing the opportunity for himself. The officer must fully disclose all details about the opportunity, and he may have to allow the minority shareholders to decide whether the corporation should proceed with the opportunity. If these steps are not followed, the minority shareholders may have a claim for usurpation of corporate opportunity.
What you Need to Know
