If you are a company director, you are likely aware that the law places obligations on you when acting in your professional capacity. However, many directors find it hard to keep track of all the duties they owe their company. You may have heard of one set of duties, known as fiduciary duties, but you might not know what these entail. In short, a fiduciary duty refers to the most stringent legal relationship that requires company directors to act with the utmost good faith. This article will explain what fiduciary duties entail in more detail. <\/p>\n\n\n\n
In a commercial context, a fiduciary duty describes the standard of conduct one party must show another party. A fiduciary duty arises when one person acts on behalf of another person in circumstances that require a relationship of trust and confidence. <\/p>\n\n\n\n
For example, company directors act on behalf of the company. Although a company is its own legal person, it cannot act for itself. Hence, without a fiduciary relationship between a company and its directors, directors may not always act in the company’s best interests.\u00a0<\/p>\n\n\n\n
The person who assumes a fiduciary duty is called a fiduciary. Other relationships that give rise to a fiduciary duty include trustees and beneficiaries, agents and principals, and solicitors and clients.<\/p>\n<\/div>\n\n\n\n
All fiduciaries, including company directors, must not act with self-interest. Instead, they must act in a way that benefits the other party. For company directors, you owe undivided loyalty to the company. Hence, the directors must act with the sole interests of the company in mind and cannot be influenced by their interests. <\/p>\n\n\n\n
The law codifies this fiduciary duty in the Companies Act 2006<\/em> across seven general duties. These general duties require company directors to:<\/p>\n\n\n\n The practical effect is that if directors breach any of these duties, they effectively breach their fiduciary duty to the company. This can make a director liable to the company for the breach, which means a shareholder can bring a claim against the director in the company\u2019s name. If you have a service contract with the company, breaching your fiduciary duty usually entitles the company to terminate the contract.<\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n\n