Corporate Fiduciary Duty

Corporate fiduciary duty matters arise in everyday business contexts.  The most common of these breach of fiduciary duty claims our Chicago business litigation attorneys handle include:

  • Duty of Care
  • Duty of Loyalty
  • Duty to Account
  • Duty of Confidentiality
  • Duty of Full Disclosure
  • Duty to Act Fairly
  • Duty of Good Faith and Fair Dealing

Corporate officers, corporate directors, and controlling shareholders generally owe some sort of fiduciary duty to the corporation and, through the corporation, to the shareholders. The corporate fiduciary duty of a corporate officer and corporate director can be subdivided into two primary corporate duties: duty of care and duty of loyalty. Corporate directors and corporate officers are required by statute, jurisprudence and sometimes by contract to perform their duties in good faith, with the care of an ordinarily prudent person in a like position and in a manner that they he or she believes to be in the best interest of the corporation. However, it should be noted that corporate officers and corporate directors are generally not responsible for mere bad business judgement under the business judgement rule.

Our Chicago commercial litigation attorneys provide a range of business and corporate law services, serve a variety of industries, and assist entrepreneurs, professionals, start-ups and small businesses.

Duty of loyalty issues may arise in the context of a corporate fiduciary duty, including:

  • Sales to or purchases by the corporation from directors or entities in which the corporate directors have an interest.
  • Dealings between a parent corporation and a corporate subsidiary.
  • Unfair treatment of minority stockholders by a majority stockholder in corporate acquisitions and reorganization transactions.
  • Misuse of corporate funds to perpetuate control.
  • Sale of control.
  • Demands of stockholders to commence derivative suits.
  • Excessive compensation.
  • Insider trading.
  • Usurpation of corporate opportunities.
  • Competition with the corporation by officers or directors.
  • Improper use of corporate position, property, or information.

However, it should be noted that the issue of whether a corporate officer or corporate director has breached a fiduciary duty (a duty of loyalty) will not arise unless it is proved that the corporate officer or corporate directors had a significant business interest in the corporate transaction.    Corporate officers and corporate directors are typically deemed to be interested if they appear or both sides of the business transaction or if they expect to derive personal economic benefit from the business transaction in the sense of self dealing.