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CEO must uphold fiduciary duty to shareholders

On Behalf of | Sep 8, 2021 | Business Law

It is not unusual for companies in Georgia and across the country to need financial support. In many cases, companies take on shareholders who provide that support in exchange for partial ownership of the company or for other benefits. While these parties may not have a hand in the day-to-day operations of a company, they still play an important part, and the chief executive officer has a fiduciary duty to those individuals when handling operations. 

The CEO is typically in charge of making important decisions on behalf of a company in a daily capacity. Because making decisions on behalf of the company also means making them on behalf of the shareholders at times, the CEO has a duty to act in the best interests of everyone involved when making those decisions. If an issue occurs, the CEO will have to face the board of directors, which is typically controlled by the shareholders. 

The specific types of fiduciary duties that a CEO has to the shareholders include the following: 

  • Duty of care, meaning taking appropriate steps to gain information before making a decision 
  • Duty of loyalty, meaning acting in the best interests of the company and its owners 
  • Duty of disclosure, meaning that the CEO fully informs the shareholders, board of directors and owners of any significant issues the company faces 

In the event that the CEO violates any of these fiduciary duties, it is possible for disputes to arise with the shareholders. These issues are not always easily handled, and legal steps may be necessary to ensure that they are addressed as needed to protect the company. If such a dispute arises, Georgia business owners may want to gain information on their options for addressing the matter. 

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