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from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interest of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers.
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On the other hand, it is equally true that, if there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, which is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which
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It followed that where a corporation cannot take an opportunity because (1) it has no money (2) it has a different business, and/or (3) it has not "interest or reasonable expectancy" in taking the opportunity, then a director will be found to have legitimately taken an opportunity for itself. Layton
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Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. A public policy, existing through the years, and derived
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the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself.
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The occasions for the determination of honesty, good faith and loyal conduct are many and varied, and no hard and fast rule can be formulated. The standard of loyalty is measured by no fixed scale.
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Guth then personally bought the Pepsi company and its syrup recipe. With the aid of Loft Inc chemists, he reformulated the recipe, and soon purported to sell the syrup to Loft Inc.
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felt that there was no real standard for loyalty and it depends on the facts of the case. The court may enquire and will decide upon the fairness of any transaction.
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209:, held that Guth had breached his fiduciary duties to Loft Inc, by taking an opportunity that the company was interested in, and could itself have exploited.
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John Lowry and Rod
Edmunds, 'The No Conflict-No Profit Rules and the Corporate Fiduciary-Challenging the Orthodoxy of Absolutism'
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duty of loyalty to the company by failing to offer that opportunity to Loft Inc, instead appropriating it for himself.
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244:§144, although authorities differ as to whether §144 covers the Guth v. Loft situation.
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Corporate Opportunities" (1981) 94
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before Guth (and Loft Inc) could inquire about obtaining syrup from Pepsi.
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He was sued by Loft Inc's shareholders, who alleged that he breached his
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between his private dealings and the job he is entrusted to do.
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that a fiduciary should leave open no possibility of
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175:after Coke declined to give him a larger
163:drink at its fountain stores. Loft Inc's
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392:In re Walt Disney Derivative Litigation
61:5 A.2d 503, 23 Del. Ch. 255 (Del. 1939)
404:In re Citigroup Derivative Litigation
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346:Broz v. Cellular Information Systems
77:, Richards, Rodney, Speakman, Terry
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504:United States corporate case law
381:Delaware General Corporation Law
286:AP Smith Manufacturing v. Barlow
242:Delaware General Corporation Law
514:1939 in United States case law
240:This has been followed in the
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159:manufacturer, which served a
358:The Charitable Corp v Sutton
277:Sources on directors' duties
120:United States corporate law
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167:purchased cola syrup from
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118:law case, important for
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509:Delaware state case law
479:Journal of Business Law
124:corporate opportunities
337:, 5 A2d 503 (Del 1939)
325:, 164 NE 545 (NY 1928)
301:, 237 NE 2d 776 (1968)
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203:Delaware Supreme Court
289:39 ALR 2d 1179 (1953)
179:discount. Pepsi went
169:The Coca-Cola Company
151:was the president of
102:conflicts of interest
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349:, 637 A2d 148 (1996)
138:conflict of interest
116:Delaware corporation
458:(1726) Sel Cas Ch61
370:Smith v. Van Gorkom
298:Shlensky v. Wrigley
487:Harvard Law Review
407:964 A2d 106 (2009)
373:488 A2d 858 (1985)
322:Meinhard v. Salmon
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432:directors' duties
419:308 US 295 (1939)
334:Guth v. Loft Inc.
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98:Directors' duties
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361:(1742) 26 ER 642
310:Keech v Sandford
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207:Daniel J. Layton
205:, Chief Justice
133:Keech v Sandford
111:Guth v. Loft Inc
75:Daniel J. Layton
66:Court membership
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313:EWHC Ch J76
498:Categories
465:References
383:§102(b)(7)
153:Loft, Inc.
50:1939-04-11
191:fiduciary
197:Judgment
181:bankrupt
126:and the
92:Keywords
58:Citation
524:PepsiCo
481:122-142
48: (
43:Decided
177:jobber
87:Layton
442:Notes
173:Pepsi
157:syrup
144:Facts
122:, on
35:Court
430:and
426:See
224:...
217:...
201:The
161:cola
490:997
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270:e
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256:v
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