a business opportunity which becomes known to a corporate official, particularly
a director or other upper management, due to his/her position within the corporation.
In essence, the opportunity or knowledge belongs to the corporation, and the officials
owe a duty (a fiduciary duty) not to use that opportunity or knowledge for their
own benefit. The corporation may have the right to damages (to be paid off) for
such improper appropriation (use) of the opportunity on the theory that the official
holds it in "constructive trust" for the corporation. The corporation may obtain
an injunction (court order) to prevent someone's use of the knowledge or opportunity.
In such cases angry stockholders may bring their own legal action for their benefit
in what is called a derivative action. Such insider misappropriation (inappropriate
use of information) may also be criminal theft, or be violative of federal or state
securities laws.
See also conflict of interest conversion derivative action fiduciary relationship
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