Directors Duties & Liabilities: Diversion of Corporate Opportunity

Abstract

In this article, the author aims to provide an analysis on the doctrine of diversion of corporate opportunity and its liabilities on a director. Directors are primarily the agents of the company i.e. the principal, and from this relationship, the inflexible rule which states that an agent is ought not to bear fruits that he acquires by virtue of his position, the doctrine of diversion of corporate opportunity emanates.  Since this principal-agent relationship between the company and its directors creates a fiduciary duty that a director, in the capacity of a trustee of company’s properties, should not divert an opportunity which was meant for the company i.e. it comes within the line of operation of the company and if it does, then the law imposes sanctions on that director. With the help of case laws and authorities, the article aims to provide an analysis on how the judges have implemented this equity principle. Furthermore, the article also elucidates on the degree and extent to which this principle binds the directors who have been terminated or resigned to not divert the corporate opportunity of a company.