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Understanding breach of fiduciary duty in a commercial business

On Behalf of | Jun 29, 2023 | Business Law

Businesses thrive in relationships. The people working together behind the products and services we enjoy are essential to the business’s success. However, it is important to know that these people are bound by fiduciary duty for the company’s protection.

What is fiduciary duty?

In a commercial business context, fiduciary duty refers to the legal responsibilities of a fiduciary to act in the company’s best interests. When making decisions for the business, a fiduciary must act with honesty and integrity, given the trust and confidence the company puts in them. Primarily, the beneficiary, which is the company, expects the fiduciary to observe the following duties:

  • Loyalty
  • Reasonable care
  • Confidentiality
  • Disclosure

How do you know if there is a breach?

Individuals who have a fiduciary relationship with a company must abide by the duties expected of them. If a fiduciary acts in breach of their duty, and the company suffers losses due to their actions, the company can hold them liable for damages. Acts such as misappropriating company assets and disclosing trade secrets to competitors are examples of breaches of fiduciary duty.

Who can be liable?

A business’s establishment creates several fiduciary relationships. The nature of the relationships varies, and different duties may apply depending on the nature. Generally, a company builds a fiduciary relationship with its board of directors, executives, business partners, employees and agents. Any of these individuals can be responsible for a breach of duty.

Your next move

There are multiple courses of action for businesses to address breaches of fiduciary duty. This includes seeking damages through litigation, petitioning for injunctive relief or privately negotiating with the fiduciary. If you need assistance weighing your options and choosing which would be the best for your North Carolina company, please schedule a consultation with our team so we can help you navigate your choices.