Fiduciary duties are often described as the highest duties recognized under the law. Their application, however, is often challenged by litigants in court. In a recent case before Iowa's Business Court, the Honorable Judge John Telleen was tasked with determining whether equal, 50/50 shareholders in a corporation are charged with exercising fiduciary duties in their dealings with each other.
Judge Telleen began the June 4, 2015 opinion by explaining Iowa's long history of applying fiduciary duties: (1) by directors and officers of a corporation to the corporation and its shareholders; (2) between a majority shareholder and a minority shareholder; (3) between joint venturers through the life of a venture and its dissolution; (4) between partners in a partnership; and (5) between shareholders in closely held corporations. After reviewing and explaining Iowa's well-established history of applying fiduciary duties in numerous business settings, Judge Telleen concluded, "[e]qual shareholders owe each other a fiduciary duty" (emphasis added). In support of this holding, the court explained
[i]f equal partners, joint venturers and shareholders in closely held corporations owe each other [sic] fiduciary duties, the Court sees little reason why those same duties should not be required of equal shareholders.
Based upon the holding in this June 2015 opinion, 50/50 shareholders in Iowa corporations should consider exercising caution in their dealings with one another consistent with the fiduciary duty concepts adopted and imposed upon Iowa shareholders.
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