Opportunity Makes a Thief: Corporate Opportunities as Legal Transplant and Convergence in Corporate Law

Abstract

The paper surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Germany, and France. Our analysis enables us to trace the development of the doctrine, exposing the way in which certain models of dealing with a particular issue have arisen, and how these models have then spread. Fiduciary duties are often today held out as typical instruments of shareholder protection in the US and the UK, both of which are often held out as model jurisdictions in corporate governance internationally. However, fiduciary duties in these two jurisdictions often operate in strikingly different ways. While the US relies on an open-ended standard, the UK corporate opportunities doctrine effectively constitutes a rule.

We explore the transplantation of the corporate opportunities doctrine, largely based on the US model, to France and Germany. In Germany, the law historically prohibited officers of the corporation from engaging in competing business activities; the statutory prohibition applied to some but not all corporate opportunities, and also left open some space for the corporate opportunity doctrine to move into. The German version of the doctrine developed gradually over the past fifty years and owes its adoption to a number of academics who studied US law and reinterpreted a number of cases – where it was clear that an officer had violated his duties to the corporation – in light of the newly discovered doctrine. By contrast, it was not until late 2011 that French courts recognized for the first time that a director may not appropriate a corporate opportunity. Until then, self-dealing issues were dealt with under a statutory provision enacted in 1867 merely requiring corporate approval for conflicted transactions, not including corporate opportunities. As the core thesis of the paper, we show that there is a considerable degree of convergence relating to the corporate opportunities doctrine, which has radiated primarily from US law to the two civil law jurisdictions. Overall, we can thus identify an “export” of the US model, possibly signaling some convergence in corporate law. The paper compares the treatment of corporate opportunities problem in all four jurisdictions, explores why the US example may have been more attractive as a transplant than the UK model, and discusses possible implications for transplant theory and the debate about convergence in corporate governance.

Keywords: Delaware, Guth v. Loft, Broz v. Cellular, Conflict Avoidance, Convergence, Bhullar v. Bhullar, Foss v. Harbottle, Fairness Test, Geschäftschancenlehre, Fiduciary Duties, Directors, Controlling Shareholders, Legal Transplants

JEL Classification: G34, K22, K41