Secret profit refers to any financial gain or advantage obtained by a corporate promoter, director, or officer due to their official role within the organization. This profit is considered "secret" because it is not disclosed to shareholders or stakeholders involved in the transaction. In essence, if the involved parties are unaware of the profit and have not given their approval, it is deemed secret.
This term is primarily used in corporate law, particularly in cases involving fiduciary duties and conflicts of interest. Legal professionals may encounter secret profit issues when assessing whether corporate officers have acted in the best interest of the company and its shareholders. Users can manage related legal matters using templates from US Legal Forms, which provide guidance on corporate governance and fiduciary responsibilities.
Here are a couple of examples of abatement:
(Hypothetical example) A corporate director sells a piece of company property to a personal acquaintance at a price below market value. The director profits from this transaction without informing the shareholders, thus making the profit secret.
| Term | Definition | Key Difference |
|---|---|---|
| Conflict of Interest | A situation where a person's personal interests could influence their professional decisions. | Secret profit specifically involves undisclosed financial gain, while conflict of interest may not always result in profit. |
| Fiduciary Duty | The legal obligation of one party to act in the best interest of another. | Fiduciary duty encompasses a broader range of responsibilities than just secret profits. |
If you suspect that secret profit may apply to your situation, consider the following steps:
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Secret profit is financial gain obtained by a corporate officer without disclosing it to shareholders.