We all are familiar with the fiduciary duties of care and loyalty owed by officers and directors to their company and its shareholders. When a corporation is struggling financially, however, the parties to whom these fiduciary duties are owed may expand and shift.

Fiduciary Duties of Officers and Directors

There are basically two kinds of fiduciary duties owed by officers and directors:

1. the duty of due care, which requires a fiduciary to act as a reasonably prudent person in the circumstances; and

2. the duty of loyalty, which requires a fiduciary to act in good faith for the benefit of the corporation.

A breach of fiduciary duty can expose an officer or director to personal liability.

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