Legal Updates

The higher the position of a company officer the higher are such officer’s fiduciary duties

September 29, 2021

A shareholder who also served as a senior manager opened a competing company.

The Court held that the manager’s activity in the competing business constitutes a breach of his obligations to the company. The main duty imposed on an officer in a company is to act solely for the benefit of the company and to advance the company's purposes. From this general obligation derive sub-obligations such as the obligation to avoid situations of conflict of interest which includes avoiding competition with the company's business and not taking advantage of any company business opportunity for his own purposes. The imposition of the duty of trust on an officer stems from the desire to restrain a person's power to act on another's property and applies to officers according to an examination of that officer’s position in the company, with only those with a substantial role and power to act and direct the company's activities are under such obligations. Here, the manager held a senior management position in the company and used, even prior to the end of his employment with the company, the company's list of suppliers and customers, and the company's agreements with them to establish a competing venture. Thus, the manager breached his fiduciary duty as an officer and therefore was ordered to compensate the company for the damages caused to it.