Examples of fiduciary duty and who owes them to your business

| Nov 30, 2020 | Business Law |

You must be able to trust the people you work with for the success of your New York business. When a group or individual involved in your organization puts personal goals ahead of the business, your company can suffer. 

The American Bar Association States that when a person fails in their responsibilities to act in the best interests of an individual or organization, a breach of fiduciary duty occurs. These duties include the following: 

Duties of good faith, fair dealing and disclosure

The courts often have discretion when determining the scope of good faith and fair dealing, analyzing the facts and considering the circumstances. Good faith refers to the honesty of a person’s conduct. Fair dealing encompasses more than honesty. It requires that parties do not act contrary to the best interests of your organization. 

Examples of individuals with fiduciary duties

A broad range of fiduciary relationships can occur in a business context. One of the most common association is that of an employee, also called an “agent” and employer or “principal.” An employee may breach a duty to their employer by sharing trade secrets, profiting at your expense, acting on behalf of a competitor or not exercising care when carrying out their duties. 

Partners have a fiduciary duty to act in the organization’s best interest and all partners. If anyone becomes careless, damaging the company’s goodwill, it is a breach of fiduciary duty. Other examples include the following: 

  • Not disclosing a conflict of interest 
  • Concealing critical information from partners 
  • Exposing the organization to liability as a result of misconduct or negligence 
  • Mismanaging company assets or funds 

Board members have a duty similar to those of partners. They may also breach their duty by preventing shareholders from exercising voting rights, not paying dividends when required, voting unreasonable compensation for themselves, and forcing out minority shareholders. 

If you suffered business abuses that include a breach of fiduciary duty, you might have grounds for a claim.