Breach of Fiduciary Duty
A fiduciary relationship denotes a person in a position of trust within a company, such as officers, agents, brokers, directors, and other personnel in a position of responsibility. These authoritative positions include a certain level of trust by nature. When this implied or explicit trust is violated, it is considered a breach of fiduciary duty and may lead to a legal claim.
Essentially, certain members of a company are expected to act in the best interest of the company, such as board members, trustees, and department heads. If these individuals act in self-interest instead, they can face monetary consequences for betraying the trust of the company and the position that they have been assigned.
A fiduciary must honor the duty of loyalty. This duty includes the exclusive motivation to benefit the company that has placed trust in the individual, rather than in self-serving interests. This means employees in these positions are barred from using a company’s financial or property assets for personal gain or from using corporate information or opportunities to purely benefit themselves. For example, a board member manipulating a company’s assets to increase stock values at another company in which they are invested, or redirecting business from a company for their own personal gain would be considered a breach.
In order to demonstrate a breach of such duty, a company must prove that the individual in question was in a position which included an element of trust and that the person acted against the best interests of the company. If this can be established, the person may face a claim of damages inflicted on the company by the breach of duty and may have to disgorge their own personal profits made from the usurped opportunity.
In a similar way, a duty of care includes those in a position of care over others, such as advising banks, contractors, architects, and partners. These employees are trusted to give sound advice and provide care for others, such as the trust placed in an architect to design a safe building. Another common example includes the trust placed in partners to act in the best interest of the partnership in daily activities and in winding up a partnership that is shutting down. If a partner fails to pay partnership bills or takes unfair distributions, they may violate the duty of care.
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