How A Breach of Fiduciary Duty Impacts Business Owners, Members, and Shareholders
When there are multiple owners of a company, disputes are more likely to happen, particularly in a closely held (i.e., smaller) company where the owners also manage the day-to-day activities of the business. When disputes arise, it can have devastating effects on the businesses. If a dispute arises, you want to address it head on and try to resolve the conflict before the matter escalates and lawsuits are filed. Clear communication and good advice are crucial to de-escalate matters and keep everyone
happy.
If you’re a shareholder or owner and your business partners (co-owners, fellow shareholders, etc.) have a rising dispute, you may be wondering what to do next. The first thing you should consider doing is to hire an attorney. One option is us—our legal team at King & Jones can help you navigate the process of negotiating a resolution, fighting to keep the business alive, filing claims, or getting out of the business with fair compensation. One of the most common types of claims filed by shareholders during owner disputes involve allegations of breach of fiduciary duty.
How A Breach Of Fiduciary Duty Impacts Shareholder Disputes
One of the first steps to filing a claim over an alleged breach of fiduciary duty is to determine if the person(s) you want to file a claim against actually owed a fiduciary duty to the business, and if so, what were their duties.
In Illinois, shareholders, directors, managers, and corporate officers owe fiduciary duties to the company, and vice versa. These duties include the duty of care and the duty of loyalty. The duty of loyalty refers to the act of putting the company’s interests before personal interests. A shareholder can breach the duty of loyalty if they use company money for personal expenses, invest in an opportunity without presenting it to the company, or operate a competing business.
It is important to note that when a breach of fiduciary duty happens, the guilty party can be held liable for any damages incurred by the shareholder and the company, and can be forced to relinquish any profits and benefits they received stemming from their breached duty. When claiming that a fiduciary duty was breached, the wronged shareholder(s) will have to prove that a duty existed between them and the company, and that the guilty party breached the duty by its actions. Additionally, the shareholder
will have to prove that they incurred damage because of the breach of fiduciary duty. These must be established before a court will require the guilty party to fork over damages and compensation for losses.
If you were recently the victim of a breach of fiduciary duty, the experienced Chicago breach of fiduciary duty attorneys at King & Jones may be able to help. We have experience examining claims to help determine which parties in a dispute are guilty of breaching a fiduciary duty. If we determine a duty was breached, we can help you craft a civil case to seek damages and compensation. Give us a call today for a consultation at 312-372-4142.