A fiduciary duty means that a person has a legal duty (usually financially-related) to someone or something else, other than themselves. This term is often used in estate planning, as an estate executor has a fiduciary duty to the deceased and the estate. But it also comes up in a commercial context, as executives, board members and others may have a fiduciary duty to a company or business entity.
This essentially means that a fiduciary is required to take reasonable steps to put another party’s interests first. If they fail to do so, especially if it results in personal gain, they could be accused of a breach of fiduciary duty.
Conflicts with business partners
Say that there are two partners who own a business together. Each partner has a fiduciary duty to the company. When making key decisions, they have to put the company’s best interests first and try to avoid causing financial harm.
One partner may believe that the other has violated that fiduciary duty. Say that one business partner was in charge of financial transactions, while the other handled product design and day-to-day operations. If the partner with financial authority used it to benefit themselves, they may have breached their fiduciary duty to the business. They could cause financial harm to the company that causes its value to drop, which in turn harms their business partner.
In the end, the partner who has suffered that harm may have to turn to litigation, which could potentially result in one business partner having to leave the company entirely. These can certainly be complex commercial litigation cases, which is when it is so helpful to work with an experienced attorney when scenarios like this arise.
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