A corporation usually consists of its shareholders, board of directors, and officers. Shareholders—i.e., those who own the stock of the corporation—generally have no right or power to manage the business directly, although, in limited circumstances, they may be vested with certain management powers in the corporation’s articles of incorporation. The main way shareholders manage the corporation is by electing the Board of Directors. The Board, in turn, is responsible for the major decisions that the company takes, such as the hiring and firing of officers, whether to declare dividends, whether to issue stock, and so on. The board of directors usually delegate much of the day-to-day tasks of running a business to officers and directors whom they hire.
Directors are fiduciaries of the corporation and its shareholders and must exercise the fiduciary duties of care and loyalty in every action they take. The fiduciary duty of care is that directors must exercise the care and skill that an ordinary prudent person in a like position would use under similar circumstances. See § 607.0830, Fla. Stat. (2018). Much like the law of negligence, a fiduciary duty requires that directors and officers use prudence and common sense when acting on behalf of the corporation and its shareholders. The fiduciary duty of loyalty comes into play when a director has a personal stake in an action to be taken by the board, such as fixing her own compensation, buying from or selling to the corporation, or subscribing to share of the corporation. This duty is one of fairness and good faith when directors deal with the corporation, as to not injure the business or the shareholders. Not surprisingly, these duties also apply to officers and directors of a corporation.
If you’re a shareholder of a corporation and believe that a director or officer has breached a fiduciary duty to the corporation’s shareholders, call a Fort Lauderdale business litigation lawyer to assist you with your breach of fiduciary duty claim. The Fort Lauderdale business lawyers at The Carlin Law Firm, PLLC regularly represent shareholders with prosecuting derivative and direct actions in both state and federal courts.