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Situations when directors breach fiduciary duties

On Behalf of | Jul 13, 2018 | Business Litigation |

There are many different corporations in Florida. These corporations are set up to run businesses and ultimately make money for the shareholders of the corporation. However, since not all shareholders can effectively make decisions for the corporation, the shareholders of the corporation will select directors and officers to run the corporation. This means that the shareholders, who have invested their money in the corporation, need to put their trust in the directors that they will run the corporation competently. If they do not it could lead to business disputes.

To ensure this occurs directors of corporations have fiduciary duties to the shareholders. Generally this means that the directors have a duty of loyalty and a duty of care. Directors must use their judgment to make decisions that are in the company’s best interest. This does not mean that every decision has to work out, but they need to act as a prudent person in their position would act. However, from time to time directors breach these duties and shareholders may have claims against them.

There are many situations where this can occur as well. Generally it is when the director has an interest on both sides of transactions or something to gain personally. It could be that the corporation buys or sells things from the directors themselves or other companies they have interest in; unfair treatment of minority shareholders; sale of control in the corporation; excessive compensation for the directors; insider trading; improper use of corporate property or information; directors competing with the corporation and other situations.

There are many instances when a director in a corporation may breach their fiduciary duty to their corporation. These are not always straight forward cases though. They really depend on the specific facts of the situation and not all transactions that could benefit a director automatically mean there is a breach of fiduciary duty. Experienced attorneys understand these cases though and may be able to guide one through it.