What Is a Breach of Fiduciary Duty?

Are you in a fiduciary relationship with someone? Are you concerned about what the consequences are of breaching a fiduciary duty? Here is all you need to know about breaching fiduciary duty and its consequences.

Table of Contents

What is a Fiduciary Duty?

Fiduciary duties arise out of a fiduciary relationship between an individual and another individual. A fiduciary is someone who has another’s ‘confidence’. This confidence is for the fiduciary to act in the other person’s, known as the beneficiary, best interests. Fiduciary duties impose obligations upon the fiduciary to not engaged in circumstances which prevent them acting in the beneficiary’s interests. A typical situation that creates a fiduciary duty is between between directors and their companies. Another common example is between an agent and their principal. While the obligations as a fiduciary depends on the relevant relationship, there are some basic obligations that fiduciaries have. Namely, to avoid conflicts of interest, not to make a profit out of the relationship, and not to act on their own benefit without the beneficiary’s consent.

What Amounts to a Breach of a Fiduciary Duty?

Generally, when a breach is when a fiduciary does not adhere to one of their fiduciary duties. A breach typically occurs when the fiduciary uses the fiduciary relationship as a basis of personal financial gain. Furthermore, it is possible to breach your fiduciary duty without a positive act. This means that you can be liable for a breach of duty, if negligent in the operation of your duties. Keep in mind, that informed consent to allow a ‘breach’ by the beneficiary, will mean the duty is not breached. Given the complexity of fiduciary obligations, it is important to get legal advice from a business lawyer to make sure you abide by your obligations as a fiduciary.  

What Are the Consequences of a Breach?

A breach of a fiduciary duty can create significant legal and financial consequences. Significant fines and possible prison sentences can result if a fiduciary breaches their obligations. Furthermore, a breach can open you to being sued by the beneficiary. In cases where it is found that company directors breach their duties, this can expose them to personal liability for company debts in cases of insolvency.

Conclusion

Being a fiduciary is a serious affair, so it is important you are aware of the effects of a breach of fiduciary duty. By remaining proactive, and understanding the scope of your duties, you can ensure you carry out your obligations as a fiduciary responsibly and ethically.

Want further information? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Find the perfect lawyer to help your business today!

Get a fixed-fee quote from Australia's largest lawyer marketplace.


You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Company Setup 101

12:00pm AEDT
Wednesday 13th March 2023

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

This article explores everything you need to know in regards to navigating trademarks, alongside
Learn about the types of liquidators, their role when winding up a company and how they impact creditors of a business.
All you need to know about hosting your company's Privacy Policy URL. A Privacy Policy outlines how your platform handles personal data of visitors.

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.