Company lawLesson 1 of 2 in the course Directors' duties and shareholder rights

Fiduciary Duties: Loyalty, Corporate Governance, Accountability, and Remedies

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

A fiduciary relationship is built on trust and confidence. This lesson explains what makes someone a fiduciary, why fiduciary duties are unusually demanding, and how loyalty shapes the relationship.

A fiduciary is a person who has undertaken to act for and on behalf of another person in a particular matter under circumstances that create trust and confidence. The person or entity whose interests the fiduciary must serve is commonly called the principal or beneficiary.

All flashcards

What is a fiduciary?
A person who undertakes to act for another in a particular matter in circumstances that create trust and confidence.
Who is the principal?
The person or entity for whom the fiduciary has undertaken to act and whose interests the fiduciary is generally required to serve.
Why does fiduciary law impose a demanding standard?
A fiduciary often has power, information, or control that a more vulnerable principal relies on. The demanding standard helps prevent misuse of that position.
What is undivided loyalty?
The fiduciary must not let personal interests or incompatible obligations interfere with the duty owed to the principal.
When may a conflict or benefit be authorized?
In some circumstances, the principal may authorize it through fully informed consent after receiving relevant information.

Quiz questions

  1. Which three primary fiduciary duties does Delaware corporate law identify for officers, directors, and other control persons?Answer: Care, loyalty, and good faith.
  2. Under the business judgment rule described in Delaware corporate law, what supports a presumption that a decision was proper?Answer: An informed decision made in good faith with an honest belief that it serves the company's best interests.
  3. What elements appear in a scholarly tripartite account of Canadian directors' fiduciary duties?Answer: A duty to the corporation, protection of shareholder interests from harm, and fair treatment of stakeholder interests.
  4. When may a constructive trust be used as a fiduciary remedy?Answer: When identifiable property or money obtained through a breach should be held for and transferred to the principal.
  5. What conclusion did the Fiduciary Duty in the 21st Century Programme reach about long-term investment value drivers?Answer: Failing to consider relevant long-term drivers, including ESG issues, can itself amount to a fiduciary failure.

Based on the Wikipedia article Fiduciary, licensed CC BY-SA 4.0. Adapted into a summary, flashcards and quizzes.

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