A breach of fiduciary duty can cause serious problems for a business, especially when a partner prioritizes personal interests over the company’s interests. Because such conduct can lead to financial losses and other business problems, companies should know how to spot and handle a suspected breach. By taking appropriate action, they can help limit further harm and protect the company’s interests.
How to address a fiduciary duty breach in New York
Business partners often have duties to each other and to the business, depending on the type of business and the terms of their agreements. When a partner fails to meet these obligations, it can lead to a failure to fulfill fiduciary obligations. If a partner suspects such a breach, they can:
- Review the governing agreements: Partnership agreements, operating agreements and other business documents can help determine whether the suspected conduct violates the agreement.
- Identify the alleged breach: Determine whether the conduct may have violated any fiduciary duties, such as self-dealing, taking business opportunities or misusing company property.
- Collect evidence: Once the possible breach is clear, gather records that support the claim. These may include accounting records, agreements, emails and meeting notes. Strong evidence helps if the case goes to court.
- Assess the harm: The evidence can help show how the conduct affected the company. For example, harm to property, other partners or ongoing deals. The conduct may have provided an unfair benefit to the other partner or reduced the company’s value.
- Consider remedies: After assessing the harm, consider what type of relief may help. These may include monetary damages for losses caused by the breach. Negotiation or another form of dispute resolution may resolve the issue without going to court.
- Decide on litigation: If other approaches fail, filing a lawsuit might be the next option. Before proceeding, consider the governing agreements, New York law, the evidence and the costs and benefits.
Each step gives partners a clearer picture of the situation before they act. Working through them in order can lead to a fair and effective outcome.
What to consider before taking action
These steps can help partners identify a possible fiduciary breach and understand some options for addressing the situation. Getting legal help early can guide partners through their rights. It can also help them reach a solution that protects the company’s interests.