Has a Business Partner Breached Their Fiduciary Duty?
Has a business partner misused some aspect of your partnership's finances? While this may be a distressing time for the company and for the partners, you may be able to mitigate the damage by suing for breach of fiduciary duty. What does this mean and how can you build a successful case? Here are a few answers.
What Is Fiduciary Duty?
The concept of fiduciary duty is a legal responsibility that is held by a person who is responsible for taking care of the money or assets of another. In a business relationship, fiduciary duty includes acting in the best interests of the company and, by extension, its owners or partners.
Fiduciary duty applies to individuals of responsibility within the business, from an accounting technician who handles the petty cash to a partner who can enter into contracts. Their duty is to handle whatever assets are under their control in a way that benefits the business — precluding them from acting to benefit themselves instead or neglecting their duty.
How Can You Prove Breach of Fiduciary Duty?
To show that a person breached this duty, you will need to demonstrate three separate things. First, there must be a fiduciary duty. A partner, for instance, who oversees the accounting clearly has a fiduciary duty. But a partner also has a fiduciary duty if they hire contractors. In this case, the duty is to negotiate for the best interest of the partnership rather than try to enrich themselves.
The second step is to prove a breach occurred. This could be from neglect — such as if the CFO failed to follow accounting principles in bookkeeping — or from intent — if a partner hid an asset purchase or used company assets for their own benefit. You might use company records, witness statements, forensic analysis, or even police reports to prove the breach.
The final step is to prove that harm resulted which might be remedied. Civil litigants must have been financially harmed to have a standing in court. Determining the amount of financial harm or how you might repair other harm through financial means helps the court see the need for damages.
Where Should You Start?
If you think that your partner may have breached a fiduciary duty, the best place to begin is consulting a lawyer with experience in civil litigation. Breach of duty cases can be challenging, particularly when complex business transactions or relationships are involved. But it will be worth the effort to help your company get back what it deserves so it can move forward to better days. To learn more about fiduciary duty and building your case, contact a civil litigation lawyer.