Fiduciary duty refers to a legal obligation to act purely in the interests of another party. The party that owes the duty is known as the fiduciary, while the party to whom the duty is owed is known as the principal. The fiduciary is not allowed to benefit from this relationship unless the principal expressly consents to it. In addition, the fiduciary should not have any conflict of interest with the principal. Furthermore, in cases where the fiduciary has several principals, the fiduciary should make sure that is there is no conflict of interest between the principals (Cassidy, 2006, pp. 219). The relationship between a director and a company is an example of a fiduciary duty. This paper examines the extent to which fiduciary duties can prevent directors from pursuing their own interests in a company.
Directors have various duties to the company that prevent the directors from pursuing their own interests. The duty of loyalty is the most important fiduciary duty that acts as a defence for the company against unscrupulous directors. It is intended to address the issue of conflict of interest between the directors and the firm. Under this duty, the directors of a company are expected to act in the company’s …show more content…
In this case, the directors of a company arrived at the share price for a leveraged buy-out merger without consulting the Company’s and independent financial experts. The directors also failed to determine the company’s total value before the merger. The directors of the company were found to have been grossly negligent in the manner in which they handled the merger. Even though the share price arrived by the directors proved to be profitable for the company, the court maintained that the directors had failed to exercise their duty of care because they had failed to consult any financial experts when arriving at their decision (Macey,
Directors have various duties to the company that prevent the directors from pursuing their own interests. The duty of loyalty is the most important fiduciary duty that acts as a defence for the company against unscrupulous directors. It is intended to address the issue of conflict of interest between the directors and the firm. Under this duty, the directors of a company are expected to act in the company’s …show more content…
In this case, the directors of a company arrived at the share price for a leveraged buy-out merger without consulting the Company’s and independent financial experts. The directors also failed to determine the company’s total value before the merger. The directors of the company were found to have been grossly negligent in the manner in which they handled the merger. Even though the share price arrived by the directors proved to be profitable for the company, the court maintained that the directors had failed to exercise their duty of care because they had failed to consult any financial experts when arriving at their decision (Macey,