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2001 Colum. Bus. L. Rev. 473 (2001)
The Venture Capitalist's Corporate Opportunity Problem

handle is hein.journals/colb2001 and id is 483 raw text is: NOTE
Terence Woolf
Much has been written about the duty of loyalty doc-
trine and the various tests developed and used by courts to
determine whether a director or officer has usurped corpo-
rate opportunities. These tests are predicated on a notion
that directors and officers owe their undivided loyalty to a
single company and its shareholders, which consequently
makes them anachronistic and ineffectual in the context of
venture capital (vc) investing.
The judicially-created tests2 may make perfect sense
when a director owes a duty of loyalty to a single company,
because a court, faced with these facts, will not need to ad-
dress the issue of competing fiduciary duties. However,
when a venture capitalist (V) serves on the boards of
numerous companies that operate in similar fields of busi-
ness, the application of these tests is impractical, and as I
intend to demonstrate, has the potential to harm capital
formation and business development.
* Special thanks to Cara Freedman, Kimberly Burgess, Dain
Landon and Tia Breakley, as well as to the staff of Columbia Business
Law Review for their work in bringing this note to print.
' For the sake of brevity, I substitute the term venture capital
with vc, appearing in lowercase lettering. I substitute the term
venture capitalist with VC, appearing in uppercase lettering.
2 The first test, addressing the corporate opportunity doctrine, was
setout in Lagarde v. Anniston Lime & Stone Co., 28 So. 199 (Ala. 1900).
The Lagarde test, however, eventually was rejected in favor of another
test established by the Delaware Supreme Court in Guth v. Loft, 5 A.2d
503 (Del. 1939). These tests, among others, will be discussed in greater
detail in section II of this Note.

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