Imagine a director of your company is secretly leading business away and usurps it for his own benefit, a so-called “corporate opportunity” that rightly belongs to the company.

What do you do?

First ask yourself whether:

1. the corporate opportunity falls within your company’s objectives and its business activities;
2. the company has an “interest” or “expectancy” in the opportunity; and
3. the director had any legitimate reason for diverting the business.

If the answers to the first two questions are “yes” and to the third “no”, it could well be that under Dutch law your director, who should have offered this opportunity to the company first, is liable for damages towards the company for not having performed his duties properly (i.e. mismanagement).

In my view any director dealing with a corporate opportunity should fully disclose this to his fellow boardmembers and shareholders who should then resolve to have the company either reject this opportunity or not, and, if rejected, to grant the director approval for pursuing the opportunity for his own benefit.

This flowchart may be of use to check if the director has breached his duties towards the company:

The ‘corporate opportunity doctrine’, acknowledged in the US and England for quite some time now, slowly but surely gains ground in the Netherlands, in (lower) case law and legal doctrine. However, still some important questions remain unanswered. For further information on this topic, please feel free to contact me.

Pieter