Investors are part of what makes American capitalism succeed. Those who have assets can choose to invest their capital in someone else's plan or idea. This helps fund innovation and provides potential income for those who invest.
When you invest capital in a business, you expect that the company will abide by the business plan and repay your investment. As the business succeeds, you could receive regular income as a shareholder.
While no investment has a guarantee, there is every reason to expect that business owners will do their best to turn a profit for investors and shareholders. Unfortunately, when a business starts to struggle, its owners and operators can sometimes make decisions that directly impact the shareholders and investors in the business.
Instead of continuing to uphold their fiduciary duty by doing what is best for the business and its investors, they may instead attempt to protect their own best interest. Golden parachutes, sudden liquidation of assets and other questionable business practices can leave owners and operators walking away with substantial money while investors are left out in the cold. Thankfully, you do have rights if you feel that the business operators violated their fiduciary duty to shareholders.
What fiduciary duty do business operators owe investors?
Fiduciary duty is a somewhat complicated legal concept. It involves placing the best interests of someone else above your own. In the case of a business taking money from investors, those who operate the business should place the interest of their shareholders above their own personal interest. That is simple enough to explain on paper, but it is often difficult for people to abide by in real life.
Some companies even use misleading information to trick investors into buying into a company. Others only want to make as much profit as possible with as little work as possible. When businesses fail, the people who operate or own them may worry about their own futures instead of their obligations to shareholders and investors.
Their personal desires may get in the way of their legal obligation to the other people who have trusted their vision and invested money in the business. Thankfully, if you have reason to believe that someone has breached their fiduciary duty to you as an investor or shareholder, you have the right to take action.
Civil lawsuits can help you recoup losses
When someone benefits from the demise of their own business, they may walk away expecting no consequences. However, you may have the option of holding individuals personally accountable for the breach of their fiduciary duty to you or even fraudulently misrepresenting the potential of the investment opportunity.
Sitting down to discuss the situation with an experienced California business attorney can help you make better decisions in the wake of a financial disappointment related to a failed business.