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Breach of Fiduciary Duty: Self-Dealing

Jun 12, 2024 | Business of Law, Corporate Planning

A fiduciary duty is a legal obligation owed by corporate officers, directors, and partners to the company and its shareholders. Several fiduciary duties are imposed on these individuals — including the duties of loyalty, care, and good faith. While there are many ways a fiduciary duty of loyalty can be breached, one of the most common examples is self-dealing. This occurs when a fiduciary takes advantage of their position to engage in a transaction that results in a personal benefit.           

When is Self-Dealing a Breach of Fiduciary Duty?

Self-dealing becomes a breach of fiduciary duty when there is a financial conflict of interest that the fiduciary has a duty to avoid or disclose. The breach of the duty of loyalty can be direct and benefit the individual committing the act — or it can be indirect and concern an unrelated third party. Self-dealing arises when a fiduciary benefits from a transaction involving the company to which they owe the duty.     

Some examples of self-dealing transactions can include:

  • A fiduciary using company funds to buy an asset from themselves
  • A fiduciary receiving a kickback for a transaction that involved company funds
  • A fiduciary paying themselves an unreasonably high fee
  • A fiduciary loaning themselves funds from the company
  • A fiduciary failing to provide proper disclosures before entering a transaction with a company they are connected with

A breach of fiduciary duty can be avoided by providing full disclosure and receiving approval from disinterested directors and shareholders before engaging in the transaction. If permission was not obtained before the transaction was entered into, a fiduciary can cure self-dealing through ratification. Liability may be avoided if the company did not forego a benefit due to the fiduciary’s actions and the value provided to the company was reasonable, in comparison with the fiduciary’s monetary gain.    

What Damages Are Available for a Breach of Fiduciary Duty?

If a fiduciary breaches their duty to the corporation and its shareholders, that fiduciary may be held liable for a wide variety of damages. Intent need not be shown for a company to recover its damages — only that impermissible self-dealing occurred. 

Both compensatory and punitive damages may both be sought in a self-dealing case, based on the harm that has been caused. While compensatory damages are meant to cover the financial losses suffered by the company, punitive damages are meant to punish the fiduciary for their wrongdoing — and deter others from engaging in similar conduct. However, punitive damages are only available where it can be shown that the fiduciary’s conduct was egregious.

Equitable remedies may be imposed by a court for a breach of fiduciary duty based on self-dealing. For example, injunctive relief may be ordered in addition to, or instead of, financial compensation. This is effectively a court order that stops or compels a certain action. Other remedies can include the appointment of a receiver to oversee and administer the company, or the rescission of the transaction in dispute.        

Contact an Experienced New York Business Law Attorney

If you are facing a dispute involving self-dealing, it’s essential to consult with a knowledgeable business law attorney who can advise you regarding the best course of action. Brinen & Associates provides reliable representation for a broad scope of business conflicts, including those involving breach of fiduciary duty and self-dealing matters. Call (212) 330-8151 or send us a message to learn more about how we can help.              


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I formerly worked as a satellite employee from my home state of New Jersey. I ended my employment with my former employer in 2016. In 2018, I was sued by my former employer for $1.1 million in Illinois State Court. I was referred to Brinen & Associates, LLC by a friend who is a client of the firm. Brinen & Associates, LLC came highly recommended. I contacted Joshua Brinen and then had a consultation at his office with his colleague Mark White. Together, Messrs. Brinen and White explained my options...

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