Slate's Law Blog A Quick Guide to Breaches of Fiduciary Duty

There are many nuanced terms in the world of corporate law, but one commonly repeated phrase is “fiduciary duty,” which refers to one party’s duty to act in the best interest of another entity. Corporate board members in New Mexico have a fiduciary duty to the shareholders of a company. 

If board members fail to uphold this duty, they are said to have performed a breach of fiduciary duty. Following these breaches, litigation is common. While a corporate lawyer can help in these situations, it can also help to understand some basics about the fiduciary duty held by corporate board members.

The Elements of a Fiduciary Duty Claim

Four elements must be satisfied in breach of fiduciary claims. These elements include:

  • Duty. This means that a duty must exist between the two parties. New Mexico has a long case history establishing that board members have a fiduciary duty to shareholders.
  • Breach. The board member must have breached this fiduciary duty. While the exact evidence required to establish a breach depends on the case, most often breaches occur in the form of board members making self-serving decisions.
  • Damages. It must be established that the shareholder experienced damages as a result of a breach. If this element cannot be shown, there will be no basis upon which to build a case.
  • Causation. This element establishes that any damages incurred by a plaintiff were directly associated with the breach by a board member.

The Basic Types of Fiduciary Duties

A board member who acts in a fiduciary capacity should focus on acting in a manner that benefits shareholders. This duty is commonly broken into three primary types, which include:

  • Duty of care. A board member must act with caution when it comes to making financial investments. Decisions made by the board member must be in the best interest of a shareholder.
  • Duty of good faith. Board members should always act in good faith when making decisions, which means not concealing or fraudulently sharing details with shareholders that later end up harming them.
  • Duty of loyalty. A board member must place the needs of shareholders first. This means that board members should not make decisions that end up placing shareholders at a disadvantage. Board members must act in good faith and with fairness and morality when making decisions that will impact shareholders.

Common Types of Fiduciary Duty Breaches

When board members breach fiduciary duties to shareholders, these breaches are said to occur in several ways, which include:

  • Engaging in “interested” transactions. Board members are tasked with managing and protecting the assets with shareholders. This means that board members cannot engage in “interested” transactions or self-serving deals.
  • Misappropriating business opportunities. Board members must never make business decisions in which the individual needs of the member are placed before the needs of shareholders. This also means that board members must fully disclose details about potential business offers to shareholders.

Speak with a Skilled Corporate Law Attorney

Slate Stern Law has substantial experience responding to and pursuing breach of fiduciary duty claims. We can help you gather the necessary documentation and create a strong legal strategy to obtain the results you deserve. Contact our law office today to schedule a free case evaluation. 


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