Business, Legal & Accounting Glossary
n. 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.
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This glossary post was last updated: 27th April, 2020 | 1 Views.