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How does a principal breach their fiduciary duty?

On Behalf of | May 2, 2024 | Business Litigation

Fiduciary duty stands as a cornerstone legal obligation. It demands that those in positions of trust, such as business principals, prioritize the company’s welfare and its shareholders’ interests above all else. In Texas, breaching this duty carries substantial legal consequences.

Understanding fiduciary duty

At its core, fiduciary duty emerges when an individual or entity commits to act for the benefit of another, typically in financial matters. In a Texas business, those with a fiduciary duty typically include corporate officers, directors and partners, who are obligated to prioritize the company’s welfare over personal gain.

Identifying breach instances

Breaching fiduciary duty unfolds when a principal neglects their obligations, potentially resulting in harm to the business or its shareholders. Such breaches can manifest diversely, including self-serving actions, misusing company assets or failing to disclose conflicts of interest.

Legal parameters in Texas

Texas law stipulates specific criteria for proving a breach of fiduciary duty. First, there must be some proof or acknowledgment of a fiduciary duty. Second, you must substantiate the breach, and then identify the resultant harm of that breach. Finally, you must demonstrate quantifiable damages. Obviously, outcomes hinge on the established duty’s specifics, the breach’s nature and the resulting damages.

Risk management strategies

Businesses can mitigate fiduciary breach risks through clear policies, regular audits and fostering transparency in all transactions. Principals must grasp the extent of their duties and the potential ramifications of a breach. There are also insurance policies that businesses and principals can carry that can cover breaches as not all breaches are purposeful or intended.


In Texas, breaching fiduciary duty jeopardizes both trust and financial stability within a business. Principals must comprehend their responsibilities, while companies should implement robust preventive measures.