There are many reasons why shareholders or investors may need to take legal action against a business or its leaders. In some cases, there may have been an attempt to freeze out investors by denying them access to shareholder meetings or depriving them of their right to dividends when the company is profitable.
Other times, the company doesn’t directly mistreat shareholders but instead has issues with an executive. Shareholders can theoretically take legal action in scenarios where they believe that the executive operating a company has breached their fiduciary duty.
When are such lawsuits possible?
Various issues can constitute a breach
A fiduciary duty is the highest level of legal obligation imposed under domestic law. An executive with a fiduciary duty to an organization should put the company’s best interests ahead of their own desires.
Breaches of fiduciary duty at the executive level often involve attempts to enrich themselves at the expense of the company. There may be allegations of self-dealing or embezzlement. In such cases, there may be a paper trail affirming the intentional misconduct of the executive.
Other times, incompetence or negligence can constitute a breach of fiduciary duty. Actions that harm the company and diminish its value could also constitute a breach of a fiduciary duty even if those actions do not directly enrich the executive. Shareholders may need to carefully review financial records to show that decisions and transactions involving one specific executive have caused financial harm to the organization.
Those attempting to initiate complex litigation over an executive’s breach of fiduciary duty likely need insight into the situation and guidance. With the right support, it may be possible to remove an executive from their position or hold them accountable for the impact of their conduct.