Breach of a Fiduciary Duty

Boards of Directors have legal, and arguably moral, responsibilities to shareholders who depend on them to run a business. These duties are called fiduciary duties and include the duties of care and loyalty. When a member of the Board fails to fulfill those duties and as a result, the shareholders are injured, they have the right to recover damages.

When Breach of Fiduciary Duty Occurs Before a claimant can recover damages due to an alleged breach of fiduciary duty, they must prove the elements that make up a case of breach of fiduciary duty Specifically, the claimant must prove that there is a fiduciary relationship between the plaintiff and the defendant. If the plaintiff is a shareholder in a company in which the defendant is a member of the Board of Directors, then equally this element of the case must be proven. Next, the plaintiff must prove that the defendant breached her fiduciary duty. For example, if the defendant acted on his own behalf and not in the best interest of the company or if the defendant did not give proper consideration to a business decision, then the defendant may have breached his duty of loyalty and care in the business. performance of their duty. If this element of the case has been satisfied, then the plaintiff must show that the defendant’s default caused harm to the plaintiff and the plaintiff must specify the nature and extent of the harm (s). So, for example, if the plaintiff is a shareholder in the company and can prove that the defendant’s actions caused the stock price to plummet, then he may have proven his damages. This is often the most difficult part of the case for the plaintiff to prove, since many factors may be involved in a decline in the stock price. It is important to note that plaintiffs in the event of non-compliance with fiduciary laws do not need to be shareholders and that defendants are not always members of the Board of Directors. For example, employees may have a successful claim in breach of fiduciary duty against employers who fraudulently or negligently manage employee retirement accounts or 401 (k) investments. Possible Remedies for Breach of Fiduciary Duty Possible remedies for a breach of fiduciary duty depend, in part, on state law. A plaintiff can recover actual damages suffered, and in many states, the plaintiff can also recover punitive damages, particularly if the plaintiff proves that the defendant’s default was due to malice or fraud. For many plaintiffs and others in a fiduciary relationship, one of the most important benefits of suing for breach of fiduciary duty is the dissuasive effect it can have on future Board members involved in the lawsuit and the Board of Directors in other companies. With each lawsuit that is filed, other members of the Board of Directors may be more aware of the possible damages that could be attributed to them and be more careful in exercising their duties of loyalty and care.

Information taken from: abogado.com

for more notes visit serna-associates.com

for more information contact Enrique G Serna