Asked in Business Formation

Q: Is a shareholder liable to conflict of interest if he is not a director?

There is a shareholder in my company decided to start up a new company that is a total reflection of my company. However he did not disclose this company, I found out my accident in social media.

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1 Lawyer Answer
Michael R. Smith
Michael R. Smith

A: That’s a very interesting question. A partner in a partnership has a fiduciary duty that would be breached by that sort of act, but generally shareholders of a corporation

do not owe each other that sort of fiduciary duty. However, in some states the shareholders in closely held corporations do have that sort of duty to each other. Note that the relevant state is the one in which the corporation is incorporated. It’s worth a call to a lawyer who is familiar with corporate law in that state to find out.

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