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Director and Officer Breach of Fiduciary Claims: The Essentials

Posted by Attorney Stephen Hance | Mar 29, 2013 | 0 Comments

Claims for breach of fiduciary duty typically arise when a company's directors and officers cause the company to violate the law, exposing the company to criminal or civil penalties, massive losses, and to damaging litigation, such as securities fraud class actions. These are complicated claims and require skilled counsel to litigate.

The fiduciary duties owed to a corporation by its directors and officers include the duties of due care and loyalty, and require directors and officers to obey the law (and cause the corporation to obey the law). No director or officer may seize a corporate opportunity for personal gain without giving the corporation the chance to take full advantage of that opportunity. No director or officer may place his or her personal enrichment ahead of that of the corporation. Nor may a director or officer simply abandon his duties to the corporation. But given the nature of these claims, this is conduct that is not always immediately apparent and can often take years to discover.

When a company has been wronged by its directors and officers, and might well sue them and recover, a dilemma exists: the very people who have damaged the company and who should be sued are running the company. In this situation, the law permits a shareholder known as the “derivative plaintiff” to sue the directors and officers in the name of, and on behalf of, the corporation.

The derivative plaintiff need merely demonstrate that a majority of the board of directors lack independence of judgment in the dispute, excusing a demand upon the directors and officers to sue themselves.

If you are a shareholder of a corporation which has been harmed through a breach of fiduciary duty by its officers and directors, and you held your shares continuously from the period during which the wrongs occurred through the present, you may be eligible to bring a claim on the company's behalf against the directors, officers and third parties, such as the company's auditors, who harmed the corporation.

About the Author

Attorney Stephen Hance

Steve represents and advises clients that are dealing with business and real estate disputes. Steve is an investor and business owner, and his approach is unique from other attorneys.

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