Definition
Fiduciary Duty (Directors)
Fiduciary duty is the legal obligation of directors to act in good faith, with care, and in the best interests of the company and its stakeholders.
Under the Companies Act, directors must act in good faith to promote the objects of the company, exercise due care and diligence, avoid conflicts of interest, and not make undue gains. Breaching these duties can lead to liability, disqualification and penalties.
Fiduciary duties apply to all directors, including independent and nominee directors, and underpin board accountability. They are the legal backbone of corporate governance, ensuring those entrusted with running the company put its interests ahead of their own.
Related terms
- Board of DirectorsThe board of directors is the group elected by shareholders to oversee a company's management and set its strategic direction.
- Independent DirectorAn independent director is a board member with no material relationship with the company, brought in to provide objective oversight.
- Corporate GovernanceCorporate governance is the system of rules, practices and controls by which a company is directed, overseen and held accountable to its stakeholders.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.