Victor Look, Esq. is a partner at Look Law. In this video he discusses 3 ways to fulfill fiduciary duties to stakeholders.
- Full disclosure
- Written consent from stakeholders
- Pursue a business opportunity in a separate line business
Well, in each business entity, the stakeholders owe what’s called fiduciary duties to each other and to the business entity itself. In the case of, say, a corporation, the shareholders and the directors owe fiduciary duties to other shareholders or directors and to the corporation. In the case of limited liability company, the members owe fiduciary duties to other members and to the LLC itself. Now, it’s important to fulfill these fiduciary duties, which really is nothing more than a set of responsibilities that they have toward the other stakeholders and toward the business entity but it’s important that they fulfill this because if they breached their fiduciary duties, they may be liable for damages.
Now, the first thing that they need to do, just keeping in line with they have a duty of loyalty to the company and to the stakeholders. If they see a business opportunity out there that they want to pursue for themselves rather than, you know, divert to the company, well, potentially they’re in breach of a fiduciary duty. What they want to do is, one, give full disclosure of their desired plan to the other stakeholders, one. Two, get written consent from those other stakeholders. And three, if they want to be completely safe, pursue a business opportunity in a completely separate line of business than the one engaged in by the business entity.
And those are the three ways that you can avoid liability for a breach of fiduciary duties.