Tonya is the president of Big Corporation. Big Corporation is looking for land on which to build a new facility. Tonya locates suitable land, but plans to purchase it herself with plans to sell it at a profit at a later date. Rick, the majority shareholder of Big Corporation hears about Tonya's plan and complains to her about it. She tells Rick that she viewed the land on her own time and that she did not breach any duties owed to the corporation. Rick tells her that she should reconsider and that he plans to discuss the matter with the rest of the board. What is the line-of-business test used in determining whether an opportunity belongs to a corporation? Did Tonya breach a duty owed to the corporation, or was she free to proceed as she saw fit on her own time, and why or why not?

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Business

Maxim Sutton

1 August, 04:21

Tonya is the president of Big Corporation. Big Corporation is looking for land on which to build a new facility. Tonya locates suitable land, but plans to purchase it herself with plans to sell it at a profit at a later date. Rick, the majority shareholder of Big Corporation hears about Tonya's plan and complains to her about it. She tells Rick that she viewed the land on her own time and that she did not breach any duties owed to the corporation. Rick tells her that she should reconsider and that he plans to discuss the matter with the rest of the board. What is the line-of-business test used in determining whether an opportunity belongs to a corporation? Did Tonya breach a duty owed to the corporation, or was she free to proceed as she saw fit on her own time, and why or why not?

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Answers (1)

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Jeffery Garcia · Answer 1

1. Categorized as the three Pong Test.

2. Yes, Tonia breached a duty

Explanation:

In this scenario, considering that Big corporation had been looking for land to build a new factory.

According to law, a director (President; Tonya) may not usurp or take control of a business opportunity if the corporation (Big Corporation) is financially able to take the opportunity (the suitable land), the opportunity is in the corporation's line of business, and a conflict of interest would result between the corporation and the director if the director took the opportunity without approval from the corporation.

As President of the Corporation, Tonya has fiduciary duty to the corporation under law, meaning she has a duty to take no action that would harm the corporation and to always act in the best interests of the corporation to the best of her abilities. Since Tonya plans to purchase it herself and to sell it at a profit at a later date she has breached the duty.

The "corporate opportunity" cannot be taken by one (Tonya) occupying the fiduciary relationship with the corporation when the proposed activity is reasonably incident to the corporation's present or prospective business and is one in which the corporation has the capacity to engage.

Inorder not to breach a duty she would have followed Rick's advice by discussing with the board members before taking any action.