Business owners, officers, and employees are legally obligated to act in the best interest of the business. When a party acts in their own self-interest, and as a result, causes harm to the company, partners, and/or shareholders, they may be liable for breaching their fiduciary duties.
Who owes fiduciary duties to a company?
Generally, anyone acting on behalf of the company is referred to as a fiduciary and therefore owes fiduciary duties to the company they represent. Fiduciaries may include directors, officers, and other employees in management positions.
While shareholders and stockholders own the business, they do not act as fiduciaries of the company, unless they also hold a position of power in the company or own the majority of the business as a controlling shareholder.
What are the main types of fiduciary duties?
Anyone acting as a fiduciary of a company has a responsibility to always put the company first. The main types of fiduciary duties include:
- Duty of care – Always exercising due diligence when making decisions on behalf of the company.
- Duty of good faith – Making decisions that best serve the company with a conscious regard of their responsibility as a fiduciary and acting with honesty.
- Duty of loyalty – Putting the company’s interests above personal interests.
What is a breach of fiduciary duty?
There are many ways a company officer can breach their fiduciary duties. Some examples include:
- Engaging in self-dealing
- Diverting opportunities away from business for personal benefit
- Sharing company trade secrets
- Improperly using employer funds for personal use
Proving a breach of fiduciary duty can be challenging but is possible with the help of an experienced business litigation attorney. A legal team can help collect the evidence needed to prove your case and recover the damages you deserve.