Business relationships are built on trust – trust between partners, managers and employees, and members of a board of directors. Violating that trust, also known as breach of fiduciary duty, can lead to financial and legal consequences for individuals and businesses involved. A breach of fiduciary duty is often complicated, involving multiple parties. Keep reading to learn more about fiduciary relationships, breach of fiduciary duty, and some examples of breach of fiduciary duty.

breach of fiduciary duty

What is Fiduciary Duty?

Fiduciary duty is the obligation for one party to act in another party’s best interests. A fiduciary accepts the responsibility of acting with care, loyalty, and confidentiality in relation to the other party. There are several types of fiduciary relationships, all built on trust between both parties. In business, the fiduciary relationship is between the agent, or employee, and his or her employer, the principal. That relationship can also exist between stakeholders and the business, between business partners, and a member to a board of directors. Outside of business, fiduciary relationships exist between a lawyer and client or a doctor and patient, among many other examples.

Examples of Breach of Fiduciary Duty

When a fiduciary fails to act in another person or entity’s best interests, there is a breach of fiduciary duty. A fiduciary breach can be intentional or unintentional, but the result is often the same. Breaches of fiduciary duty can lead to long-term consequences in business, both for the business itself and all individuals involved. Sometimes, the duty is breached when the fiduciary puts his or her interests first. Other times, the breach of duty is due to negligence on the fiduciary’s part. 

One example of a breach of fiduciary duty is an employee selling or sharing trade secrets with a competitor. In that case, the agent (employee) acted in his or her own interest in direct conflict with the interests of the principal (employer). The employee might have sold a list of suppliers to a competitor or shared a previous employer’s client list. 

Other instances of breach of fiduciary duty include:

  • Mismanaging company funds
  • Failing to disclose a conflict of interest
  • Intentionally damaging the company’s reputation 
  • Refusing access to business records for shareholders
  • Self-dealing
  • Misrepresenting financial accounts to partners

What to do if Fiduciary Duty is Breached

It takes an expert to prove damages from a breach of fiduciary duty. First, the damaged party must prove that a relationship of trust existed. The fiduciary must have been aware of their duties and either intentionally or unintentionally violated those duties. They must also show damages caused by the failure to fulfill fiduciary duty. The breach of duty must have caused either economic damage to the victim or an economic benefit to the fiduciary. Fiduciary relationships can be complex, and finding the proof of a breach of fiduciary duty is often even more complicated. 

If you’re involved in a breach of fiduciary duty, an attorney may be able to help. At Atolles Law, S.C., we have a qualified legal team experienced in business law and commercial litigation who can help you gather evidence to prove your case. Contact us today to schedule a consultation to learn how Atolles Law, S.C. can fight to protect your rights.