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What is a breach of fiduciary duty?

On Behalf of | Jan 3, 2024 | Business Litigation |

While running a business can be very rewarding both personally and professionally, it is by no means easy. As a business owner, you’re going to have to deal with customers, clients, business partners and workers. You may also deal with third-party representatives on a daily basis.

Some of the individuals mentioned owe a fiduciary duty. This means that they must act with integrity and with the best interests of your company in mind.

There are occasions when fiduciary duties can be breached. Outlined below are some of the most common examples.

Breaches by executives

The executives in a company, which includes owners, partners, directors and upper management, are answerable to shareholders. People in these roles have a fiduciary duty. Every decision they make must be in the best interests of the business.

Executives may breach their fiduciary duties if they become closely affiliated with a rival firm for personal profit and to the detriment of shareholders. Also, they may breach their duties if they purposely avoid a potentially beneficial deal for the company to profit personally.

In short, company money and investments should be utilized for the greater good of the business and not for the personal profit of senior management.

Breaches by third parties

It may be necessary for your business to utilize the services of third parties. For example, you may consult with an independent financial advisor. People in these positions owe your company a fiduciary duty. They must provide impartial advice based on facts.

If they provide inaccurate information which leads to a detrimental investment, this may be a fiduciary breach. Also, if they deceive you to profit personally, they have probably breached their legal obligations.

If you feel that a fiduciary has breached their duties, it’s important to take action. Seek legal guidance to find out how to remedy the situation.