What Is Breach of Fiduciary Duty in Partner or Shareholder Disputes?

 Posted on August 27, 2021 in Business Law

There are multiple different types of disputes that may be addressed through business litigation. When disputes arise between business partners or the shareholders of a corporation, these cases will often involve claims that a party has committed a breach of fiduciary duty. Those who are involved in these types of disputes will need to understand their rights and obligations. By working with a skilled business law attorney, a business partner or shareholder can make sure they are taking the correct steps to resolve these issues effectively.

Understanding Breach of Fiduciary Duty

Certain parties have an obligation to act in a way that will benefit someone else. This is known as fiduciary duty, and the party who has this duty is known as a fiduciary, while the party to whom the duty is owed is known as a principal or beneficiary. Business partners have a fiduciary duty toward other partners, and a corporation’s majority shareholder has a fiduciary duty toward the other shareholders. 

A fiduciary may be accused of committing a breach of fiduciary duty if they acted in a way that benefited their own interests or the interests of a third party instead of benefiting the company. These cases may involve the claims that a fiduciary has failed to uphold one or more of the following types of obligations:

• Duty of care - When making business decisions, a fiduciary must consider all available information and assess the information critically to ensure that they are acting in the best interests of the company. A person may be accused of breaching this duty if they did not solicit advice from informed sources or failed to properly consider input from employees.

• Duty of loyalty - A fiduciary must put the interests of the business ahead of their own interests. A person may be accused of breaching this duty if they had a conflict of interest when making business deals or took actions on behalf of the business with the intent of furthering their own personal benefit.

• Duty of good faith - While managing a business, a fiduciary is required to advance the interests of the company while acting within the bounds of the law. A person may be accused of breaching this duty if they did not manage business operations prudently and honestly.

• Duty of confidentiality - A business’s partners, shareholders, and directors are required to ensure that sensitive information related to the company is kept confidential. A person may be accused of breaching this duty if they disclosed the business’s proprietary information for their own personal gain.

• Duty of disclosure - Partners and shareholders are required to fully disclose all relevant information to other partners or shareholders, including information about the business’s assets and debts, contracts, business operations, investment and expansion opportunities, and potential risks. A person may be accused of breaching this duty if they did not inform others about issues that affected shareholders or the business as a whole.

Contact Our Fort Lauderdale Business Litigation Attorneys

Elliot Legal Group can provide legal representation for those who have been accused of committing a breach of fiduciary duty or those who believe that a business’s partners or shareholders have failed to meet their obligations. To get legal help with these types of disputes, contact our Hollywood, FL business dispute lawyers at 754-332-2101.

Sources:

https://www.law.cornell.edu/wex/fiduciary_duty

https://www.investopedia.com/ask/answers/042915/what-are-some-examples-fiduciary-duty.asp