A fiduciary duty is the highest level of legal obligation imposed by the law. Certain professionals have a fiduciary duty to their clients, such as attorneys. People involved in business operations may also have a fiduciary duty.
Executives helping run businesses have a fiduciary duty to the company and its shareholders. People who enter into a partnership have a fiduciary duty to the organization and also to one another. If one partner discovers a breach of fiduciary duty by the other, business litigation may be necessary to hold them accountable or enforce the terms of a buy-sell agreement.
What is a breach of fiduciary duty?
Frequently, partnership disputes about a breach of fiduciary duty involve intentional misconduct. Both embezzlement and self-dealing are examples of behaviors that benefit one partner at the expense of the other and the organization they created together.
When there is proof of intentional financial misconduct, the affected partner can seek to terminate the working relationship by buying out their partner and holding them accountable for the economic impact of their misconduct. Other times, breaches of fiduciary duty relate to incompetence or the avoidance of responsibilities.
Simple procrastination can constitute a breach of fiduciary duty if delayed job functions result in financial consequences or legal setbacks for the company. Incompetent management of projects or company resources can also constitute a breach of fiduciary duty.
Documenting what appears to be a breach of fiduciary duty and reviewing partnership agreements with a legal professional can help partners impacted by misconduct or inept business management. A breach of fiduciary duty can potentially justify a partnership buyout and other legal actions intended to hold a partner accountable.