Fiduciary dutyFiduciary duty
is one of the duties that corporate directors and officers have towards a corporation
, as well as the duties that partners have to a partnership
and trustees have to a trust
Broadly speaking, fiduciary duties can be grouped into three categories:
- Duty of Loyalty. A fiduciary must act in accordance with the interests of the beneficiary, and not his own interests.
- Duty of Candor. A fiduciary must not withhold information from the beneficiary, particularly with respect to the fiduciary's dealings with the beneficiary.
- Duty of Care. A fiduciary must act with some degree of care with respect to the beneficiary. This is usually formulated as a duty to take the care that an ordinarily prudent person would in similar circumstances.
A variety of other duties, and legal doctrines, are subsumed in these three duties. For example, the duty of care includes a duty of confidentiality, i.e. that the fiduciary will not disclose the beneficiary's information. The duty of loyalty includes the corporate opportunity doctrine. Fiduciary duties take into account the nature of the relationship in which they are formed, and, in some circumstances (such as in limited liability companies
) may be modified by contract.
Also related is the Business Judgement Rule which provides that the decisions of a corporation's board of directors will not be second-guessed unless a decision is self-interested (a violation of the duty of loyalty) or (more rarely) the board acted in an imprudent manner (a violation of the duty of care).