A Contractual Solution To "Corporate Opportunity" Problem

The concept of"Corporate Opportunity", which used to be a unique concept in the Anglo-American legal system, was introduced to China by"Corporation Law of People's Republic of China"(2005). Many western corporate law scholars are perplexed by the"Corporate Opportunity"problem thanks to its ambiguity of concept and complexity of judgment standards concerning the existence of a"Corporate Opportunity". Also, Chinese corporate law scholars have conducted extensive research on this issue. However, as the research products of them, most of the articles related to this topic on a general basis and few of them are in a very specific field. In order to research this problem through a new perspective, this dissertation tries to discuss the"Corporate Opportunity"problem in the context of the venture capital, which plays a more and more important role in the development of China's economy.This dissertation consists of four sections. Section I gives an introduction of the respective characteristics and the relationship between the venture capital and the corporations it invests in, and the concept of"Corporate Opportunity". First, the venture capital is not the best choice for corporations'financing, which indicates that corporations seek the venture capital for financing purposes are not in the list of best corporations. They are fast growing but also at high risk and in need of other services provided by the venture capital, such as management service besides financing support for its growth. For the purpose of the risk sharing, the venture capital always diversifies its investment. And its multi-service like financing support and management service provided to companies it invests enable it to have a good access to these companies'information. Second, it is very difficult to define the"Corporate Opportunity"which diverts scholar's research focus to the several American judgment standards applicable to the"Corporate Opportunity".Part II makes an analysis of the four American judgment standards which are"the Line of Business Test","the Interest-or-Expectancy Test","the Miller Two-Step Test"and the"the American Law Institute Approach"and points out the flaws in these standards which are not suitable for the solution of the venture capital's"Corporate Opportunity"problem. These standards, not considering the special structure and the characteristics of the venture capital, will cause the economic inefficiency if they are used separately to determine the existence of"Corporate Opportunity".Part III places emphasis on the"contractual theory of the corporation"which states ways to"opt out"the loyalty duty, pointing out it is the best way to solve the venture capital's"Corporate Opportunity"problem. It effectively reduces the transaction cost and improves the feasibility of the ways to solve this problem.Part IV analyzes the legal consequence, remedies and the eight factors the court should take into account when it faces a"Corporate Opportunity"case, ensuring the balance between the protection of the corporation's interests and the effective exploitation of commercial opportunities.