You are a fiduciary if you are a corporate officer of a corporation in Florida. Directors and officers of corporations have fiduciary responsibilities to both the company and its shareholders (including to minority shareholders). Even though you never explicitly agreed to undertake the duties, obligations, and possible liabilities of a fiduciary, you still have fiduciary duties as a corporate officer of a business. Fiduciary duties have been imposed on corporate officers because they significantly influence the company’s operations.
Fiduciary duties are based on the fundamental premise that enforcing them promotes loyalty and trust while ensuring that a firm’s top management may freely share information without fear of it being misused to profit themselves instead of the company. In addition to the responsibilities of care, good faith, and protection against self-serving at the cost of the business, corporate officers and directors of corporations in Florida bear a fiduciary responsibility of loyalty to the corporation. Corporate officers of corporations must advance the interests of the company rather than their own personal interests, which is the basic premise behind the obligation of their fiduciary duties. This duty must be carefully observed and fulfilled if they are to do so in a way that benefits and protects the company. There can be no contradiction between responsibility to the corporation and one’s own self-interest.
The Florida Supreme Court defined officers’ fiduciary responsibilities in an early case: Orlando Orange Groves Co, v. Hale, 144 So. 674, 677 (Fla. 1932). It ruled that directors and officers have a quasi-fiduciary relationship when it comes to the shareholders and corporations, even if they are not under the technical definition of trustees. By accepting the position, they implicitly agree to use their best care and judgement on behalf of the company and utilize the powers granted only for the advantage of the business. Even if a director is elected or appointed by a specific shareholder group, they must operate for the interest of all shareholders.
The Fiduciary Duties of Care, Good Faith
The duties of good faith, care, and loyalty are codified under the Florida Statutes §607.0830(1). Corporate officers are obligated to act in the company’s best interests under these duties. Their everyday duties and the company’s running should always be done by following these duties.
The fiduciary duty to act in good faith cannot be breached by gross negligence alone. To find an officer guilty of bad faith, something more severe such as a willful disrespect for one’s duties or deliberate neglect of duty must be found. To hold a director liable for their actions, the corporate officers must be shown to have known that they were not fulfilling their fiduciary duty.
The Business Judgment Rule
If the business judgment rule applies, officers of Florida corporations may be shielded from responsibility for alleged negligence of their fiduciary duties. Courts are generally hesitant to substitute their own business judgement for that of the board of directors or officers to criticize business judgments with the benefit of hindsight. In spite of the fact that the business judgement rule is a defense, it is a substantive rule that requires a plaintiff to demonstrate that the officer’s behavior falls outside of the rule’s scope.
To avoid being held accountable for business judgement errors that harm the company’s interests, corporate officers must operate in good faith. Suppose a board’s decision is likely to be challenged in court. In that case, corporate officers should pay close attention to the board’s decision-making process and ensure that the minutes accurately reflect its factual basis for the decision, any recommendations or reports received from management or outside experts, and the company’s interests as a whole in making the decision.
Fiduciary Duties: The best techniques for carrying them out.
A corporate officer’s fiduciary obligations may entail a variety of actions, some of which may be more detailed than others, depending on the situation, such as:
- Being involved in meetings of the Board of Directors.
- Making sure that all the officials of the organization are capable of carrying out their responsibilities.
- Disclosing all conflicts of interest.
- Carrying out their duties in good faith, care, and loyalty.
- Managing other officers of the organization.
- Taking the time to thoroughly study all reports and follow up on any issues that may arise.
- Acquainting yourself with current business concerns and policies of the company.
- Scheduling for reviewing and approving executive salary, legal compliance, and the organization’s budget.
- Keeping records of any disagreement with a board decision.
Breach of Fiduciary Duty claims and time limits
Any person to whom the duty is owed can bring a breach of fiduciary duty claim against a corporate officer in Florida. The victim has the right to claim damages as well, which may be compensatory or punitive. However, such claims have to be brought within the limits laid down under the statute of limitations. In order to avoid being barred by the applicable statute of limitations, an action for breach of fiduciary duty has to be brought within one year of the date of the breach of fiduciary duty. A party has one year from the date of discovery of the breach to launch legal action once the breach of fiduciary duty is found. Except in cases of fraud, no claim may be filed more than three years after the incident occurred for violation of fiduciary duty.
Contact our Business Attorneys for Fiduciary Duty related claims
In corporate litigation, a violation of fiduciary duty claims is quite frequent, although they can contain complicated facts. In order to get the best possible outcome for your case, you need an attorney who has dealt with similar situations before. Contact our business attorneys to schedule a consultation.