There are of course circumstances where a director’s fiduciary duties are different, perhaps by reason of the reasons the company exists.
Some companies are not incorporated or set up to provide profits and dividends to shareholders. The most common example are companies limited by guarantee. However, other non-limited by guarantee companies which (for example) may be registered as charities may have completely different objectives (and therefore it will never be a breach of a director’s fiduciary duties not to pursue profit).
This will largely be determined by the company’s constitution and its Articles of Association. There may also be shareholder agreements which dictate the strategic direction and corporate governance of the company and these documents are critical when determining whether a director has breached his fiduciary duties.
Other circumstances may also exist whereby a director does not have to prioritise shareholder interests.
For example, if the company is insolvent (either its assets are less than its liabilities or it is unable to pay debts as and when they become due) then a director’s fiduciary duties lay more with the interest of creditors rather than shareholders.
A director should not seek to direct assets to shareholders where the company is struggling to trade and creditors may as a result be at risk should the company be placed into insolvency. In such circumstances a director would be in breach of his/her fiduciary duties and may be liable for misfeasance (please see our booklet entitled “misfeasance” which provides more detail on this area).
Directors should also be aware of their non-fiduciary duties in respect of, for example, the proceeds of crime legislation and anti-money laundering matters (amongst many other non-fiduciary risks).
