Q. I recently resigned as a director of a small company and am thinking of setting up on my own. The company has written to say that I owe them "fiduciary duties". What are fiduciary duties?
A. A "fiduciary" is a person to whom power or property is entrusted for the benefit of another. For example, a trustee holds property for the benefit of others, a professional adviser is entrusted with information by their clients and a director is entrusted with the power and authority to act for a company. Fiduciary duties arise to ensure that the fiduciary does not abuse the power or property entrusted to him or her.
Directors owe the following general duties to the company:
- To act within their powers.
- To promote the success of the company.
- To exercise independent judgment.
- To exercise reasonable care, skill and diligence.
- To avoid conflicts of interest.
- Not to accept benefits from third parties.
- To declare any personal interest in a proposed transaction or arrangement.
A director's fiduciary duties start when he becomes a director and generally cease upon resignation. However, certain aspects of the duty to avoid conflicts of interest continue to apply beyond resignation as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director. It may well be this which the company is referring to, given that you are considering setting up a competing business.
For specialist advice contact Keith Swan of Patterson, Glenton & Stracey Solicitors by email at ks@pgslaw.co.uk or by telephone on 0808 231 7043. Patterson, Glenton & Stracey Solicitors have provided legal advice to the people of South Tyneside for over 125 years. For details of their full range of services and to view previous Gazette articles please log on to www.pgslaw.co.uk. Patterson, Glenton & Stracey Solicitors ; the Logical Answer .
