Our attorneys represent individual shareholders, officers, and directors in all aspects of derivative and fiduciary duty litigation. These types of business disputes often involve defending and prosecuting claims that an officer or director breached his or her fiduciary duties to the company, engaged in actions of “self-dealing,” or misappropriated corporate opportunities.
What fiduciary duties do officers and directors owe?
A publicly traded company is governed by the corporation’s board of directors. The company’s board of directors owes the corporation and its shareholders various duties, including the duty of care and the duty of loyalty. Because the officers and directors are in a position of trust, their relationship with the shareholders is a fiduciary relationship. While the scope of these duties can be complex, officers and directors essentially have a duty to inform themselves of all information available to them prior to making a business decision and always put the interests of the corporation and its shareholders above their own personal interests. In addition, the directors have a duty to act in good faith and always advance the best interest of the corporation, a duty of candor and full disclosure, and a duty to keep corporate information confidential.
What is derivative litigation?
Derivative litigation is a lawsuit in which an individual shareholder or institutional owner of shares in the company files a lawsuit on behalf of the company. This type of lawsuit is typically filed against the officers and directors of the company who have been accused of misconduct or some other improper course of conduct that resulted in damage to the company. In essence, the shareholder represents the interest of the company and pursues the lawsuit on behalf of the company. Derivative lawsuits are often the only means available to contest the actions of insiders of the company – officers, board of director members, and other executives – who have been accused of harming the company.
Why is this form of litigation important to shareholders?
Derivative lawsuits are an important part of the system of checks and balances in corporate affairs. In this form of litigation, any shareholder, no matter how large or small his or her holdings in the company are, has the right to hold officers and directors accountable to the company for their actions. This is a powerful right, but one that is often overlooked or simply unknown to most shareholders. This form of litigation has many benefits for shareholders, including having the potential to make changes to benefit shareholders, removal of officers and directors who have engaged in misconduct, create investor governance groups to provide additional checks and balances within the company, and even seek monetary compensation in the form of damages.
Call us today.
If a majority owner has violated his or her fiduciary duty, or if you have been accused of violating your own fiduciary duty, the attorneys Powers Taylor can help. We invite you to contact us to discuss the matter as soon as possible.