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What is a fiduciary duty and how may it be breached?

| Aug 11, 2017 | Commercial Disputes |

Individuals may form partnerships and alliances as they see fit to serve their interests and advance their causes. Businesses may do the same thing, and, in New York, when a corporation places trust in a person or other business and that other party is aware of that trust, then it may be said that a fiduciary relationship exists between them. The fiduciary is the party upon which the trust is place for the benefit of the other.

Fiduciaries are obligated to act in the best interests of the parties that place their trust in the fiduciary. Fiduciary relationships exist outside of business; the relationship between an attorney and their client also creates a fiduciary duty. When a fiduciary fails to meet their duties to those who expect them to act with care, then it is possible that a breach of fiduciary duty has occurred.

Breaches of fiduciary duty can have dire consequences. In the context of business, readers may imagine a director who is responsible for improving the value of shares in the business for investors. If that director elects to make poor decisions that hurt the business’s bottom line and that devalue the business’s shares and shareholders’ interests, then it may be possible to show that the director breached their fiduciary duty to the business entity.

Serious breaches of fiduciary duties can result in corporations going under, closing their doors and putting individuals out of work. A fiduciary that fails to take their responsibilities seriously may jeopardize the success of a business and its likelihood of having a stable future. In some cases, though, breaches of fiduciary duties can rise to the level of commercial disputes that may be addressed through business litigation. Attorneys who work in this field may be able to provide wronged entities with guidance on how to seek compensation for their losses.