| Directors of a corporation are expected to honor their | | | | expectancy in the opportunity. When these criteria are |
| fiduciary duties of loyalty and care at all times. Part of | | | | met, there is a conflict of interest if the director takes |
| remaining loyal to a corporation is acting in the | | | | the opportunity. |
| corporation's best interests at all times. In addition, it | | | | There are times even when a director that takes an |
| also requires acting in good faith. When there are | | | | independent contractor position can actually be |
| issues of loyalty, they are likely to involve conflicts of | | | | presented with a conflict of interest. This occurs if the |
| interest. | | | | director's other company or corporation contracts with |
| There is the potential that a conflict of interest arises | | | | the corporation. If the director has a "material financial |
| at any time when a director of a company or | | | | interest in the transaction" then it is likely that there is a |
| corporation is presented with an opportunity. Many of | | | | conflict of interest. |
| these opportunities presented to a director are not | | | | In this type of scenario, the director is not necessarily |
| actually conflicts of interest but there is still the potential. | | | | on both sides of the deal but will still get money if a |
| When the opportunity presented to the director is | | | | certain event occurs. A financial interest in the deal is |
| presented to the director in his or her personal | | | | not enough; it must be material. This is a facts-based |
| capacity and not in the capacity as a member of a | | | | sliding scale that a court or judge will look into to |
| board of directors, the possibility of a conflict of | | | | determine if the financial interest reaches the levels of |
| interest increases dramatically. | | | | material. |
| As in all things, there are a couple of different types of | | | | Other than a material financial interest in the |
| conflicts of interest in the corporate capacity. For there | | | | transaction, the director may be in a position to sell a |
| to be any conflict of interest, the opportunity presented | | | | piece of property or an idea to the corporation for |
| to the director must become a corporate opportunity. | | | | financial gain. This puts the director on both sides of |
| To be this, the opportunity presented must be 1) in the | | | | the transaction equation and could potentially be a |
| same line of business as the corporation or 2) in an | | | | problem. This situation could be a problem any time it |
| area where a corporation has an interest or | | | | occurs. |