You put in a lot of faith in your partner when you start a partnership business. But at times the partner does not live up to it. When the partnership agreement is signed by both the partners, they establish a legal relationship having the fiduciary duty to one another. The partners are obligated by this fiduciary duty to work in the best interest of the business. Hence if you feel that your partner has violated their fiduciary duty, you can approach a business litigation lawyer experienced in fiduciary duty cases.
Fiduciary duties of a business partner consists of
- Duty of Care
- Duty of honesty
- Duty of fairness
- Duty of obedience
- Duty of loyalty
- Duty to act in good faith
Breach of fiduciary duty may be considered to have occurred under one of these circumstances:
- One of the business partner moves a business opportunity away from the company with the intention of making a profit for themselves.
- One of the Directors or the board of directors acts against the interest of the company in order to gain financial benefits for themselves.
- When one of the partners involves themselves in insider trading.
- When a partner takes away a portion of the profit to which they are not entitled.
- Negligent behavior in the management of the business.
- If one of the partners conceals the relevant information or misrepresents it and this act causes financial damages to the company.
Some other forms in which breach of fiduciary duty occurs is
- Lack of good faith
- Competing with the partner
Filing a Claim
The following must be proved when you file a claim for breach of fiduciary duty:
- The existence of the fiduciary relationship between yourself and the person accused.
- The breach of fiduciary pertaining to a specific duty that was owed to you by them.
- You are entitled to a remedy for the breach of fiduciary duty.
Financial damage must have been suffered by you due to the action of the partner obligated to fiduciary duty. The partner has taken undue advantage of your good faith and has violated the terms of the business relationship with you. You have the right to file a claim for damages if you can prove the above mentioned three points.
The possible remedy that you can receive depends on the breach of fiduciary duty.
- If a partner concealed profits or did not place earnings in trust for you, you may recover monetary damages.
- If the breach of fiduciary duty is done by the manager to you and the other partners of your company, you could be allowed to remove the individual from your business partnership.
The burden of proof falls on the partner who is filing the claim. Self-dealing or getting an unfair advantage in a dealing connected to the partnership has to be cited.
Conclusion:In business law fiduciary duty is a serious concept. Every general partner must take full responsibility to fulfill the duties as per the partnership agreement. Whichever side of dispute you are on, you must consult a reputed business litigation lawyer to handle the fiduciary litigation.