How Does Breach of Fiduciary Duty Affect Shareholder Disputes?

Shareholder disputes may arise between co-owners of a company. Shareholder disputes can happen in any business with multiple owners, but are especially common in closely held organizations where there are just a few owners, where owners are often actively involved in managing the business, and where owners know each other well.  Whether your dispute arises in a closely held company or not, you need to know your rights and need to understand the circumstances under which shareholders can recover compensation for damages or seek other legal remedies such as an injunction.  

An Irvine shareholder disputes attorney can provide advice on the types of claims which commonly arise, on whether you have a case, and on what you will need to prove to make a successful claim if you believe you are a shareholder who suffered harm.  Our attorneys have extensive experience representing shareholders involved in disputes and we can provide you with the guidance and advice you need on resolving disputes through litigation or through alternative dispute resolution.

Among the many types of claims we handle include cases where allegations are a breach of fiduciary duty are made.  Breach of a fiduciary duty can make the fiduciary responsible for harm. Give us a call today to learn more about whether you have a claim for a breach of fiduciary duty or whether you have other grounds for a successful shareholder dispute.

A Breach of Fiduciary Duty Can Affect Shareholder Disputes

If you are considering making a claim as a damaged shareholder, you should first determine whether the defendant you’re making a claim against owed a fiduciary duty to the business.

According to a 1969 California case, Jones v. H.F. Ahmanson & Co., shareholders do not owe a fiduciary duty either to other shareholders or to the corporation solely because they are shareholders. However, there are some circumstances under which a fiduciary duty is imposed on a shareholder under California law.

This can occur, for example, if a majority shareholder in a company usurped an opportunity which should have belonged to the corporation, harming the minority shareholders.  If a majority shareholder otherwise acts in a way that harms minor shareholders, the majority shareholder may also be considered to have breached a fiduciary duty.

When a corporation is closely held and a shareholder is a controlling shareholder, that controlling shareholder can also owe a fiduciary duty to the corporation as well as to minority shareholders. When shareholders serve as executives, board members, directors, or otherwise take an active role in the management of the company and business operations, they also owe a fiduciary duty in this capacity to other shareholders.

It is important to determine if a fiduciary duty is owed, because a fiduciary duty is the highest duty that is owed under the law. When a breach of fiduciary duty occurs, the fiduciary can generally be held liable for the damage done to the business and to the other shareholders. A breach of fiduciary duty occurs in a variety of situations, such as when the fiduciary puts his own interests before the company and shareholders or when the fiduciary engages in other behavior that could be detrimental to the company and shareholder interests, such as embezzling company funds.

When a shareholder dispute arises, shareholders who allege a fiduciary duty was breached will have to prove that a duty existed, the fiduciary did not fulfill the duty, and that damage occurred as a result. There are defenses, such as asserting that the decisions made were a normal part of conducting business and that the business judgment rule protects against liability. However, if it can be demonstrated that a fiduciary duty was breached, the fiduciary who failed to fulfill his obligation can be required to compensate shareholders for damages and losses.

Getting Help from an Irvine Shareholder Disputes Lawyer

An Irvine shareholder disputes lawyer will carefully evaluate the circumstances of your case to determine if any parties had a fiduciary duty which was breached. We can also help you to explore other grounds for a civil case that you may bring as a shareholder if you believe you were damaged by the actions of any business owners or co-shareholders.  Our goal is to help protect your business interests, so we’ll assist you in determining the best way to approach your disagreement and making the strongest case possible throughout your dispute.

To learn more about your legal rights, your options for pursuing a claim, and the things you must prove to successfully recover compensation for your losses, call Brown & Charbonneau, LLP  (866)237-8129 or contact us online to speak with an experienced member of our legal team.