If your company uses external resources to provide advice and assist in growing your business, these sources are often called “fiduciaries” and they have an obligation to the company to act in its best interests. Your company is called the “beneficiary,” and it is entrusting its well-being to the fiduciary. Common examples of fiduciaries that may assist your company are attorneys and certified public accountants. In most circumstances, the fiduciary relationship is not formally documented, but it is automatically created by the role that has been taken on.
The primary basis for a fiduciary relationship is trust. The fiduciary must act with the highest degree of care and loyalty when fulfilling their obligations. If they fail to do so, they may be held personally liable.
● Duty of Loyalty. A fiduciary’s duty of loyalty requires the fiduciary to put the company’s best interests before personal gain. The fiduciary must act in a manner that does not benefit him/her in an economic way or that would deprive the company of potential profit.
● Duty of Care. A wider range of responsibility is covered by the duty of care. A fiduciary is required to devote the necessary time and effort to make informed decisions for the beneficiary. This may include performing research and careful gathering of information before making an important decision.
● Duty of Confidentiality. A beneficiary can expect to trust a fiduciary with sensitive or private information. Thus, when your company is involved in litigation or another legal matter, you can feel comfortable providing your attorney with confidential information.
Breach of Fiduciary Duty
When a fiduciary fails to uphold his/her duties, it can result in the fiduciary being held liable for damages caused by the breach. A breach of fiduciary can be an action, or the failure to take proper action, resulting in unethical behavior. For example, an abuse of power or embezzlement of company funds are actions that constitute a breach of fiduciary duty. However, failing to be adequately involved in the company may also constitute a breach of fiduciary duty.
The fiduciary relationship ensures that trust is maintained throughout the relationship and that all actions are taken for the beneficiary’s best interests.
With over 36 years of experience providing sophisticated legal advice on corporate matters and related fiduciary litigation, Mailly Law is here to help. With our structure, you work with the same attorney who gets to know your culture and anticipates your legal needs. Contact us today to schedule your initial consultation.