Breach of Fiduciary Duty
Navigate Breaches of Fiduciary Duties with Achkar Law
What are Fiduciary Duties?
Fiduciary duties are the legal obligations of a person or entity to act in the best interest of another person or entity. The fiduciary must put the interests of the other party above their own and avoid any conflicts of interest. A fiduciary relationship is based on trust, and the fiduciary is expected to act with honesty, integrity, and loyalty.
Who has Fiduciary Duties?
Fiduciary duties can apply to many different relationships, such as those between a trustee and a beneficiary, a lawyer and a client, a financial advisor and a client, and a director or officer and a corporation. In the context of a corporation, directors and officers have fiduciary duties to act in the best interest of the corporation and its shareholders.
What Creates a Breach of Fiduciary Duty?
A breach of fiduciary duty occurs when the fiduciary fails to act in the best interest of the other party or engages in conduct that is contrary to their fiduciary obligations. For directors and officers of a corporation, breaches of fiduciary duties often involve acts of disloyalty, such as using their position for personal gain or making decisions that benefit themselves at the expense of the corporation.
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A corporate lawyer can help by establishing practices and internal processes that will allow accountability through a checks-and-balance approach.
A fiduciary duty is an additional level of responsibility provided to key players in an organization who are exposed to confidential and sensitive information. As such, breaches of fiduciary duties can have grave consequences on the individuals, and the companies themselves.
The Canada Business Corporations Act, and the Ontario Business Corporations Act directors and officers of a corporation must:
- Act honestly and in good faith with a view to the best interests of the corporation and
- Exercise the care diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
Considering that directors and officers typically have greater insight into a company’s financial and other highly sensitive information, they carry a greater responsibility to ensure that the information is not used in any way that is unfavorable. Or is not in the best interest of the organization.
The Best Interest of a Corporation
The best interests of a corporation typically include the best interests of shareholders, employees, retirees and pensioners, creditors, consumers, governments, the environment, and the long-term interests of the corporation. Directors and officers have a duty to balance the interests of all stakeholders and to ensure that the corporation operates in a sustainable and responsible manner.
Available Defences for Breaches of Fiduciary Duties
Directors and officers who are facing a claim of breach of fiduciary duty typically have two defences available to them. First, they can argue that they exercised the care, diligence, and skill that a reasonably prudent person would have exercised in comparable circumstances. Second, they can argue that they relied in good faith on financial statements or reports provided to them by the corporation or a professional person.
Contact Achkar Law for Help
At Achkar Law, we have a deep understanding of the intricacies of fiduciary duties in the business world. Our dedicated team of corporate lawyers based in Ontario is committed to safeguarding the interests of both businesses and shareholders. Whether you need counsel on fulfilling your fiduciary duties or require legal representation in a matter related to the breach of fiduciary duty , we’re here to assist you. Take the first step toward protecting your business interests – contact our experienced team today.
