Are there still fiduciary duties in a family owned business? Are they different or relaxed because the stockholders all happen to be related to management?
The short answer is that yes, there are fiduciary duties, and no, they are not different or relaxed. The law does not distinguish between fiduciary duties applicable to a family-owned business and fiduciary duties applicable to any other business. But there are a range of ways to form your family-owned business to provide for the level of fiduciary duties appropriate for your needs. To appreciate them, it is important to first get a sense of fiduciary duties and how they apply.
Who owes fiduciary duties? Fiduciary duties are imposed by the law in a variety of circumstances. Trustees can owe fiduciary duties to the beneficiaries of their trusts. Guardians can owe fiduciary duties to their charges – legally known as “wards.” But in the business context, it is those responsible for running and managing a business, including family members.
This is a complex issue which has given rise to substantial quantity of litigation. In the context of a Blog, the most we can accomplish is to highlight the issue for you. It is important to understand the implications of and responsiblities for fiduciary duty in a family-owned business. If you have questions or need assistance with this aspect of a family-owned business or any other business entity matter, please contact Ariel Bedell, Esq.