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The Basics Of Corporate Fiduciary Duties And Business Litigation

Wednesday, June 17th, 2020

Fiduciary duties refer to the actions and decisions that directors, officers, and business partners take on behalf of stakeholders or other partners. When professionals violate a contract or do not act in the best interest of the corporation, they may be held responsible for breaching their fiduciary duties.

What are the main types of fiduciary duties?

Professionals in corporate settings are bound to uphold many fiduciary duties. However, most agree the following are the main fiduciary duties to consider:

  1. Duty of care: Whether a professional is making a choice on behalf of a partnership or company’s shareholders, he must do so with proper care. The professional must act in good faith, with reasonable care another in his position might use. He must also act with the reasonable belief that his actions are in the best interest of the corporation and shareholders.
  2. Duty of good faith: This is similar to the duty of care but refers more to intentional dereliction of duty rather than an accident.
  3. Duty of loyalty: Partners, officers, and directors must have complete loyalty to their corporation and shareholders. There are several ways in which they can breach their fiduciary duty of loyalty, including by secretly profiting from the business or competing with the corporation.

The business judgment rule

This rule allows for partners, officers, and directors to take “reasonable risks” and still maintain their fiduciary duties. In the course of directing corporate affairs, these professionals can make innocent mistakes. The mistaken professional use the rule as a defense in response to an assertion of breached fiduciary duties, as long as the following factors are met.

  • The actions in question were made in good faith and on an informed basis; and
  • The actions were made with the best interest and intentions in mind.

Unless it can be proven otherwise, the business judgment rule helps protect professionals from liability to the corporation and its shareholders. Proper evidence must be shown in order to refute the rule.

Filing a claim of breach of fiduciary duty

Filing and dealing with a claim of breach of fiduciary duty can be complicated for both parties. Litigation commonly includes fraud and other business torts. Sometimes, these claims move quickly and include expedited discovery requests and requests for temporary or preliminary injunctions. At other times, these claims can last for years. The key to protecting yourself against a claim is to have a knowledgeable, skilled attorney.

Find the right attorney to protect you

If you are dealing with a claim of breach of fiduciary duty, it is vital to have an attorney that will have your interests in mind. The Business and Litigation attorneys at Brown & Fortunato are experienced, knowledgeable, and determined to protect the interests of the client. You can reach us at (833) 228-6300 or Send Us an email for more information.