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Breach of fiduciary duty can lead to business litigation

On behalf of Sheftall & Associates, PA posted in business litigation on Saturday, April 21, 2018.

The relationships between business officers, shareholders and the business itself can be a complicated one. It is important to recognize that business officers in Jacksonville and nationwide have duties toward the business and its shareholders that must be upheld. If these duties are breached, it could lead to business litigation.

fiduciary duty is a relationship that two entities have with one another in which one entity (the fiduciary) has the legal duty to act solely on behalf of the interests of the other entity (the principal). For example, in the business world business officers act as fiduciaries to a corporation and its shareholders as principals. This legal duty can become compromised when there is a conflict of interest between the fiduciary and the principal.

In general, a fiduciary is not to make a profit off of the relationship he or she has with the principal unless such a benefit is explicitly granted when the fiduciary relationship is formed. A conflict of interest exists when the fiduciary cannot make an unbiased decision, due to having some sort of vested interest in the company. A conflict of interest can also exist when the fiduciary acts not in the principal’s interests but to benefit his or her own personal gain. If a conflict of interests exists, the fiduciary is oftentimes required by law to step out of the relationship.

Unfortunately, sometimes a fiduciary does not act in the best interests of the principal and acts in a manner that benefits him or herself instead. This can lead to business litigation. Business litigation may also be necessary if the fiduciary is dishonest and does not disclose a conflict of interest. Conflicts of interest on the part of fiduciaries can harm a business financially. When a manager or officer breaches their fiduciary duty to the company they work for or its shareholders, the company or shareholders may need to take legal action to rectify the situation. Such lawsuits are very complex, however, so it is important that those who find themselves in such situations make decisions that are informed and that meet their best interests.