An officer can not use company resources to obtain personal business opportunities

May 16, 2019

A shareholder who is also an officer of a company that provides security services, guarding servicer and secure logistics, purchased a business of managing ATMs. The company’s second shareholder contended that it is a business opportunity of the company, which belongs to the company.
The Court rejected an application to approve a derivative claim in the company. An officer of a company is required to refrain from exploiting company business opportunity in order to obtain a benefit for himself or for another. When a shareholders agreement exists and determines the scope of the company’s activity, it is possible to determine according to this definition what is deemed a company business opportunity. In the absence of such an agreement it is necessary to examine whether material company resources were used (for example, company funds, employees, know-how or reputation) and whether the opportunity competes with the company or creates a conflict of interest for the officer. Here, there was no agreement on the subject and there was no use of company resources, although the name of the company was used when the officer requested credit for the new transaction, but the company was not a guarantor for the transaction and it was clear that this was not credit to the company. In addition, the new activity does not compete with company activities and therefore the request to approve a derivative claim was rejected.