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

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. Rules and practices regarding the handling of directors’ personal interest in certain business opportunities encompass an economic as well as a moral dimension.

Our article explores 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. 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.

We explore 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. In Germany, in particular, 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 opportunities doctrine to move into. It owes its adoption to a number of academics who studied the US corporate opportunities doctrine and re-interpreted a number of cases involving officers who violated their duties to their corporations.  Through the confluence of judicial and academic developments, the US model of the corporate opportunities doctrine thus became entrenched in German law. French law, which has until very recently hesitated to say that directors owe a duty of loyalty, has moved in a similar direction. Though the exploitation of corporate opportunities is still hardly regulated in France, and cases only deal with managers of small, privately held limited companies, the rules that are emerging encompass the idea of preventing competition to the company’s activities. The reference to the company’s line of business signals an affinity with the US approach and a divide with the UK conception. The export of the US model possibly signals an element of convergence in corporate law. Our paper enables us to tackle a number of questions. First, how can convergence take place on the micro-level of specific legal doctrines? Second, why are systems converging to a particular model (here apparently the US one)? And third, is convergence truly functional, or only formal?