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What are violations of fiduciary duty?

On Behalf of | May 23, 2023 | Business Litigation

A fiduciary is an individual or company that acts for you. Fiduciaries often manage property or money for others, and they need to place their clients’ best interests first when making decisions on their behalf.

Violations of fiduciary duty occur when the company makes decisions that benefit the company over the individual. These are common violations of fiduciary duty.

Boards of directors breaches

Shareholders in corporations elect a board of directors. These directors make major company decisions and should act in their shareholders’ best interests. Therefore, they cannot prevent shareholders from voting or accessing corporate records. They cannot give themselves unreasonable contributions and refuse to pay shareholder dividends. They also cannot force minority shareholders out of the company. These are all breaches of fiduciary duty by boards of directors.

Breaches of agents

Agents include anyone who takes on the responsibility of acting for another person in an agent-principal relationship. They include employees and non-employees who make decisions for companies. Common breaches include sharing trade secrets or acting in such a way that competitors benefit from the action. If employees do not complete the work the company hired them to do or they do not follow the directions given to them, they are in breach. Misusing or not properly recording corporate funds and profiting where the employer loses are also breaches.

Partnership breaches

Partners are fiduciaries to their companies and partners. They are not allowed to mismanage company money, damage the business’s reputation through poor behavior, conceal any vital information from their partners or expose the company to liability due to their negligent actions. Breaches also include hiding conflicts of interest and self-dealing.

The law requires that fiduciaries avoid acting in their own self-interest, especially if it damages the interests of the individuals they owe duties to.