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Understanding a breach of fiduciary duty

On Behalf of | Jul 3, 2023 | Business Litigation

When a person has a business, trust and confidence are important with the partnerships and relationships they build with others. This includes their clients and especially, the people they hire to oversee the business.


In a business, the people who have positions of trust and authority have a set of legal and ethical obligations called a fiduciary duty. This means that they are required to act in the best interest of the organization and placing that interest above their own personal gain.

These positions require a duty of loyalty, avoiding conflicts of interest and self-dealing. Fiduciaries are also expected to use reasonable care and skill to make informed decisions for the business. They also have a duty to maintain confidentiality of business information and must disclose accurate and timely information to stakeholders.

Breach of fiduciary duty

There are several common breaches of fiduciary duty. One is self-dealing, where the fiduciary diverts business opportunities for their personal interests, instead of the business.

Another is misappropriation of funds, meaning that the fiduciary uses business assets for their own personal use without authorization. Fiduciaries may also participate in insider trading. Breaches of fiduciary duty can cause the business to lose money, negatively affect its reputation and there may be legal consequences.

Shareholders, employees and investors may seek compensation from the business and the business can lose customer and business partner trust. While the business partners can address the breach of fiduciary duty internally, they may need assistance to defend against a claim. There is help available.