Resolving Breach of Fiduciary Duty Claims
When you’re part of a company, you expect that others are just as invested in that company’s success, but this trust can be misplaced. Shareholder disputes can arise when someone in a position of power appears to be acting against the company’s best interests. At Oliver Hughes LLC, our experienced business attorneys help you understand your rights and take meaningful steps to protect your investment. Dedicated legal representation and support can help you navigate this difficult time and take necessary action to hold the appropriate parties responsible and reach a resolution. Learn more about breach of fiduciary duty claims in shareholder disputes and the legal remedies available.
What Is Fiduciary Duty?
Fiduciary duty refers to the relationship of trust between one party managing assets or making financial decisions and another benefiting from those decisions. Some common examples outside the business world that many people are more familiar with include trustees, accountants, and financial advisors. However, corporate officers, directors, and majority shareholders also have a fiduciary duty to the companies they represent and other shareholders.
If someone makes decisions that aren’t in the company’s or the shareholders’ best interests, it could result in a breach of fiduciary duty, which can carry legal penalties. Business attorneys play a key role in these situations by helping those affected understand when fiduciary duties apply and the legal options if a suspected breach is discovered.
Breach of Fiduciary Duty Claims in Shareholder Disputes
When shareholder disputes involve breach of fiduciary duty claims, it can cause problems for the company as a whole and mean that legal action is necessary. These claims often revolve around misappropriation of company assets, hiding material information, and self-dealing.
Most breach of fiduciary duty claims occur when someone acts to promote their personal benefit instead of prioritizing the company. For example, a majority shareholder may use their influence to ensure that a friend’s business gets a contract with the company without disclosing the potential conflict of interest. Another example that involves the misuse of company funds could be if the shareholder uses a business credit card for expenses during a personal vacation.
Shareholder disputes often arise due to a breakdown of trust, financial harm to the business, or board dysfunction, and it’s also possible for a breach of fiduciary duty claim to center around oppression of minority shareholders, such as if the majority shareholders change the bylaws to dilute minority interests.
These situations can be complex, but an attorney can help you understand Georgia’s fiduciary breach standards and help you understand your legal options based on who was harmed.
Options for Resolving Breach of Fiduciary Duty Claims
Taking prompt action after a breach of fiduciary duty can ensure the person is held accountable and mitigate further damages. Below are some of the legal options to explore.
Petition for Detailed Accounting
Shareholders have a right to inspection of records, and the court can enforce this right if the fiduciary is refusing to provide access to the records. This can be helpful if there are concerns about mismanagement or embezzlement that haven’t been able to be proven yet. In some cases, this can show that there has been no breach of fiduciary duty, which can resolve the issue without further action.
File a Lawsuit
There are two types of lawsuits that are generally used in breach of fiduciary duty cases: direct and derivative. A direct lawsuit is appropriate if the shareholders themselves have suffered harm as a result of the fiduciary’s actions. If the corporation has suffered damage, the shareholders can file a derivative lawsuit on behalf of the company. Working with an attorney is a key part of this process, as they can help you determine which filing is applicable and represent you throughout the process.
Request an Injunction
If you believe that there is the potential for imminent harm to the company or the other shareholders, you can request an injunction from the court which can stop someone from being able to take any further actions. This option does require that you be able to show evidence that irreparable harm will occur if the court doesn’t intervene, and monetary losses alone aren’t generally sufficient for a judge to grant an injunction.
Consider Dissolution of the Company
If relationships among the shareholders have broken down completely, ending the business may be an option to consider. This is generally a last resort, and other alternatives, such as a buyout, should also be evaluated. An attorney can help you determine if there is enough evidence for a court-ordered dissolution and what happens afterward. They can also ensure that you’ve exhausted all of your options to save the business.
Legal Representation Is Critical
Shareholder disputes can be complex, especially when there is a suspected breach of fiduciary duty. Working with an attorney ensures you have all the information on your legal options and experienced counsel as you decide what to do next. In some cases, it may be possible to avoid legal action altogether through strategic negotiations or mediation.
If you have concerns that the majority shareholders or a corporate officer has breached their fiduciary duty, discussing your situation with an experienced business attorney is the first step. At Oliver Hughes LLC, we understand how serious these claims are and the devastating effects they can have on a business, and our law firm is here to help you determine the best path forward. Call 770-230-1447 for a free 30-minute phone consultation to get started.
