Conflict of Interest

Conflict of interest business transactions arise in many different breach of fiduciary duty contexts.  Generally, conflict of interest business transactions in the business context can be defined as any situation in which a business owner (usually in a fiduciary position), or corporate director, is in a position to exploit a professional or official capacity in some way for his or her personal or corporate benefit.

Corporate Officers and Directors

The fiduciary duty of loyalty imposed on corporate officers (corporate fiduciary duty) and directors is essentially designed to ensure the fairness of business and corporate transactions in which the corporate officer or director has an interest, direct or indirect, either personally or for other business reasons, that lead to personal or financial gain.   Thus, for  business decisions involving elements of a conflict of interest or self interested transaction, the director or officer must act fairly and in the best interest of the corporate or business.  In such self interested transactions that would lead to a conflict of interest transaction, Chicago business litigation lawyers would analyze the business situation to determine if the corporate transaction could reasonably be believed to be fair to the corporation or business at the time of such corporate authorization of the business transaction.

Majority Shareholders or Controlling Shareholders

Majority shareholders or controlling shareholders also have a duty of loyalty to the corporation.  Thus, majority shareholders carry a heavy burden in establishing the fairness and propriety of self interested transactions or conflict of interest transactions.  The rule has been defined by the United States Supreme Court as, “The majority has the right to control; but when it does, it occupies a fiduciary relation toward the minority, as much so as the corporation itself or its officers and directors.”

It should also be noted that the same duty of good faith and loyalty is imposed on fifty percent owners of a closely held corporation.