page_title: Fiduciary
section_title: Fiduciary duties under Delaware corporate law
hierarchical_section_title: Fiduciary / Fiduciary duties under Delaware corporate law
caption_attribution_description: English: Diagram illustrating the fiduciary duty The reference to the waivability of gross negligence is a specific reference to the Law of Delaware. Delaware courts have unequivocally stated that section 102(b)(7) of the Delaware Code protects directors against personal liability arising from gross negligence, but not against liability arising from a lack of good faith.
context_page_description: A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.
  A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
context_section_description: The corporate law of Delaware is the most influential in the United States, as more than 50% of publicly traded companies in the United States, including 64% of the Fortune 500, have chosen to incorporate in that State. Under Delaware law, officers, directors and other control persons of corporations and other entities owe three primary fiduciary duties, (1) the duty of care, (2) the duty of loyalty and (3) the duty of good faith.
  The duty of care requires control persons to act on an informed basis after due consideration of all information. The duty includes a requirement that such persons reasonably inform themselves of alternatives. In doing so, they may rely on employees and other advisers so long as they do so with a critical eye and do not unquestionably accept the information and conclusions provided to them. Under normal circumstances, their actions are accorded the protection of the business judgment rule, which presumes that control persons acted properly, provided that they act on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.
  The duty of loyalty requires control persons to look to the interests of the company and its other owners and not to their personal interests. In general, they cannot use their positions of trust, confidence and inside knowledge to further their own private interests or approve an action that will provide them with a personal benefit (such as continued employment) that does not primarily benefit the company or its other owners.
  The duty of good faith requires control persons to exercise care and prudence in making business decisions—that is, the care that a reasonably prudent person in a similar position would use under similar circumstances. Control persons fail to act in good faith, even if their actions are not illegal, when they take actions for improper purposes or, in certain circumstances, when their actions have grossly inequitable results. The duty to act in good faith is an obligation not only to make decisions free from self-interest, but also free of any interest that diverts the control persons from acting in the best interest of the company. The duty to act in good faith may be measured by an individual's particular knowledge and expertise. The higher the level of expertise, the more accountable that person will be (e.g., a finance expert may be held to a more exacting standard than others in accepting a third party valuation).
  At one time, courts seemed to view the duty of good faith as an independent obligation. However, more recently, courts have treated the duty of good faith as a component of the duty of loyalty.
caption: Diagram illustrating fiduciary duty, placing good faith within duty of loyalty.
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