Cain & Kiel Law

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Has a corporation board breached its fiduciary duty to you?

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Purchasing shares in a company is often a leap of faith, but it is not something you might do blindly. Certainly, you must believe in the company and its product or service. Additionally, you may expect the company to succeed and thus provide you with a sound and profitable investment. You also trust that those who make the decisions for the operations of the company will have your interests in mind and be your voice.

As a shareholder in a corporation, you do not control the way the business runs. Ultimately, the board of directors and the officers of the corporation handle those matters. However, it is their duty to make wise decisions about the direction of the company and the use of its funds since those decisions directly affect your well-being as a shareholder. This responsibility is known as fiduciary duty, and it is a legal obligation.

The board has a duty to protect your interests

Fiduciary duty existed when you entrusted your money to the corporation in exchange for a share in the business. Whether you purchased your shares through a broker or privately, you likely received documentation that outlined your rights, including your right to vote for board members and what you can expect from the corporation. The corporation probably did not guarantee that you would make a profit from your shares, but it may have promised to act in good faith on your behalf.

The board of directors and officers have a responsibility to act within the company the way a reasonable and prudent person would. Any decisions or changes the board or its officers make must benefit the corporation and its shareholders before they benefit the board or an individual member. Board members who place their own financial or personal gain over the well-being of the shareholders may be in breach of their fiduciary duty.

Your rights as a shareholder

Depending on the level of shareholder you are, you may have more say in the running of the corporation. You may have the right to weigh in on any fundamental changes the board proposes to the bylaws or any new direction an officer suggests for the company.

You always have the right and responsibility to hold the board accountable for its actions. Even if you do not have the right to vote, you are not completely at the mercy of the corporation's board of directors. If you suspect the board has breached its fiduciary duty to you resulting in financial loss or other damages, it is within your rights to seek legal redress through the civil courts with the help of a skilled Texas attorney.

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