A breach of fiduciary duty is a civil action in which the claimant seeks compensation for lost profits caused by a director or person in a fiduciary relationship breaching their duty. Damages may also be recovered if it is determined that a director has breached their duties to the company through negligence.
The majority of fiduciary duties are now codified in company law. Nonetheless, common law duties continue to exist in a slightly modified guise. They establish confidence and trust, introducing the broader principles of no conflict and no profit.
In this article, Derivative Action Breach Of Fiduciary Duty, we take a look at the process involved and the options available to you.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of derivative claims brought as a result of a breach of fiduciary duty. Once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What are the fiduciary duties of a director?
The Companies Act of 2006 outlines a number of fiduciary duties imposed on directors:
- to act within the authority granted by the company’s constitution;
- to act in a fashion that will most likely contribute to the company’s success;
- to act with reasonable care, skill, and diligence in the performance of their duties;
- refusing to accept benefits from third parties;
- avoid potential conflicts of interest;
- to make independent decisions; and
- to declare any interest in a transaction or arrangement the company intends to engage.
In addition to their statutory obligations, directors must also consider or act in the best interests of the company’s creditors, particularly when insolvency is a possibility, and maintain the confidentiality of the company’s affairs.
If a director fails to comply with these requirements, it may be considered a breach of fiduciary duty, in which case the claimant may seek compensation for lost profits or director negligence.
Derivative claim remedies
As with all civil and commercial court proceedings, derivative claims have access to a variety of potential remedies. In cases where the court orders the payment or repayment of money by the directors held liable, the money will not go to the shareholder(s) who initiated the claim; rather, it will be paid or repaid to the company for the company’s overall benefit.
The following are the primary remedies for successful derivative claims:
- Damages payable to the company from the at-fault director(s)
- An injunction prohibiting the at-fault director(s) from perpetrating any further illegal acts or violations
- The cancellation of transactions that benefited the director(s) in error personally
- The dismissal of one or more directors from their position as employee/s
- Restitution of all company assets held by directors
- A restitution order or a demand that the directors account for any profits they may have made
Disputes involving breaches of director’s fiduciary duties
Such disputes are among the most legally complex and can have severe repercussions for both a director and a company. Therefore, if you find yourself in such a situation, you should seek advice and representation of experts in this field.
From a director’s perspective, they must have strong legal representation in order to minimise any impact on their livelihoods and reputations. In order to exonerate a director from any liability, we will carefully evaluate the relevant facts and develop a solid strategy on your behalf, which may include demonstrating that you acted reasonably and honestly under the circumstances.
When a director does not act in the company’s best interests, it can have a significant effect on investor confidence. If you suspect a transgression of directors’ responsibilities in your company, you must act immediately.
Shareholders who intend to take legal action against a negligent director must navigate the intricate rules governing derivative claims. Our lawyers have extensive experience with these claims. We will provide expert counsel and representation to ensure that the company’s loss is recovered in its entirety. If a director breaches his or her fiduciary duties to the company, the company may pursue legal action. This action is typically initiated by parties seeking compensation for monetary loss or damage. Some breaches of duty are regarded as criminal offences and can result in the director’s disqualification, fines, or even imprisonment in the most severe cases.
It’s not only shareholders that can make a claim for a violation of directors’ duties, other directors of the company can also make a claim. Individual directors may even file a claim against the entire board of directors so long as they do so in the company’s name and to recoup its loss.
How we can help
We have a proven track record of helping clients deal with the process involved in derivative claims. We will guide you diligently and ensure all checks are carried out swiftly and efficiently. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to contact our Corporate solicitors
It is important for you to be well informed about the issues and possible implications of derivative claims. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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