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Breach of Fiduciary Duty

A fiduciary duty is one that involves a high level of trust. It’s a situation where one person must act for the benefit of others. In the business world there are potentially many situations that may give rise to a fiduciary duty of one kind of another. If you believe someone with a fiduciary duty to you has let you down or you’re accused of breaching a fiduciary duty, we can help.

A fiduciary relationship exists when one places their utmost trust in another to manage and protect money, property or their interests. It’s a relationship where one person is obligated to act for the benefit of one person or a group of people. A breach of fiduciary duty may result in personal liability by the fiduciary who didn’t live up to his or her obligations.

Fiduciary duties involve faith and confidence and they’re established when that confidence is given by one person and accepted by another. The duties of a fiduciary include loyalty and reasonable care of the assets within their custody. All of the fiduciary’s actions must be performed in the interests of the beneficiary.

Corporate directors and officers owe fiduciary duties to the corporation and its stockholders. A breach of a fiduciary duty may result in personal legal liability for the director, officer or controlling shareholder. Fiduciary duties for corporate board members and officers include,

  • Obedience: Duties within the scope of their delegated authority under the law and the applicable corporate governing documents must be fulfilled,
  • Loyalty: They owe a duty of loyalty to a corporation and its shareholders. They are expected to put the welfare and best interests of the corporation above their own personal or other business interests.
  • Care: Officers and directors need to use appropriate care and diligence when acting on behalf of the corporation. They should exercise reasonable prudence in carrying out their duties to achieve what’s in the best interests of the corporation. Under the business judgment rule, an officer or director may not held liable for business decisions made in good faith and with reasonable care that turn out to harm corporate interests.
  • Good Faith and Fair Dealing: Officers and directors must act with honesty, good faith, and fairness when handling corporate obligations. This continuing duty runs through their daily tasks and operation of the corporation.
  • Fiduciary Duty of Disclosure: Candor in business discussion is important between officers, directors, and shareholders so that they may assess material risks and make informed decisions. Full and fair disclosure of material facts is essential before seeking board or stockholder approval of major corporate business transactions, such as a mergers with or acquisitions of other companies.

Fiduciary duties also exist when the business is a partnership or limited liability company. They may exist if you use an investment advisor, stock broker or accountant. Because the beneficiary of a fiduciary relationship has put so much trust into the relationship the law can be very harsh to those who don’t live up to their obligations.

The best way to avoid litigation in fiduciary relationships is to make sure all the parties are aware of their responsibilities and to correct problems and resolve them early before they build and cause major problems. To learn more about fiduciary duties or if you need legal representation in such a matter, schedule a consultation by Calling now at (714) 415-2007 today.


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