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What recourse do businesses have against officers or directors?

Competition is an integral part of the free market system. As such, Michigan businesses work hard to position themselves in the market in a manner that gives them an edge to compete with others.

Unfortunately, however, others may not always be playing by the same rules. Other businesses may engage in unlawful or unfair trade practices, which can have a serious impact on those businesses that are doing things by the book.

The threats are not always external, either. Businesses may see their own corporate officers or directors engaging in certain conduct that puts the business at a disadvantage or causes the business to suffer harm. For instance, officers or directors may usurp opportunities that should have belonged to the company, which results in the loss of that potential business. In other situations, officers or directors might compete directly with the company, which can be particularly harmful because of the inside information that officer or director has about the company.

These actions, among others, may give rise to business litigation. Corporate officers and directors owe fiduciary duties to the companies for which they work, and it typically constitutes a breach of that duty to usurp corporate opportunities or compete with the company. There may be other legal claims a business can assert as well, such as when an officer or director helps misappropriate trade secrets belonging to the business.

The bottom line is that businesses should protect themselves from others who are not playing by the rules, especially since those violations can come directly at the expense of the business. Cases involving claims like those discussed above can involve substantial damages because of lost profits or decreased business value. Accordingly, legal action should be taken in these instances to enforce the business's rights and ensure this type of conduct does not occur again.

Source: American Bar Association, "Breach of fiduciary duties," accessed on Oct. 17, 2015

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