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A breach of fiduciary duty can lead to securities litigation

Business owners in Colorado who want to see their companies flourish often deal in securities. Having to report to and keep shareholders happy is not always an easy thing to do. If one is not careful, claims of breach of fiduciary duty may come one’s way. When this happens, securities litigation may be unavoidable.

Fiduciary duty means that one must act in another party’s best interests. Failing to do so is called a breach of fiduciary duty. As far as securities go, if business owners or corporate boards make decisions that end up hurting their shareholders, their shareholders may take legal action to recoup their losses. In order to do this, however, the following elements must exist in the case:

  • Element number one: Duty exists
  • Element number two: That duty was breached in some way
  • Element number three: Damages were incurred

A couple of examples of breach of fiduciary duty include business owners acting in their own self-interests and business owners failing to disclose important information to investors. By having the fiduciary relationship defined and the responsibilities spelled out in a contract, these things may be avoided. If any issues do arise, the contract keeps everyone on the same page about what is and is not acceptable and what actions are appropriate should a breach occur.

There is a right way and a wrong way to go about growing one’s business by selling securities. Legal counsel can help business owners in Colorado go about it the right way. Further assistance can also be provided should breach of fiduciary duty claims be filed and securities litigation become necessary.