Fiduciary Duty
The obligation of one party (the fiduciary) to act in the best interests of another (the beneficiary) when entrusted with property, authority, or confidence. In Texas business law, fiduciary duties are owed by corporate officers and directors, by general partners, and (subject to the company agreement) by LLC members and managers.
A fiduciary duty is the obligation of one party (the fiduciary) to act in the best interests of another (the beneficiary) when entrusted with property, authority, or confidence. In Texas business law, fiduciary duties are owed by corporate officers and directors to the corporation; by general partners to the partnership and to other partners; and, depending on the company agreement, by LLC members and managers to the LLC and to other members.
The three components
Texas recognizes three traditional components of a director's fiduciary duty:
Duty of obedience. The duty to act within the scope of authority granted by the certificate of formation, governing documents, and applicable law, a director may not authorize ultra vires acts.
Duty of care. The duty to perform with the care that an ordinarily prudent person would exercise in similar circumstances. Gearhart Indus., Inc. v. Smith Int'l, Inc., 741 F.2d 707 (5th Cir. 1984) (applying Texas law).
Duty of loyalty. As reformulated in Ritchie v. Rupe and reaffirmed in Sneed v. Webre, 465 S.W.3d 169 (Tex. 2015): "the dedication of [the director's] uncorrupted business judgment for the sole benefit of the corporation."
Informal fiduciary duty
Texas also recognizes that a fiduciary duty may arise informally from a "moral, social, domestic, or purely personal relationship of trust and confidence" that exists prior to and independent of the parties' business relationship. Ritchie v. Rupe, 443 S.W.3d at 874. Courts apply this doctrine narrowly.
Contractual modification (LLCs and limited partnerships)
For LLCs, Tex. Bus. Orgs. Code § 101.401 permits the company agreement to expand, restrict, or, effective May 14, 2025, eliminate any duties (including fiduciary duties) and related liabilities owed by members, managers, officers, or other persons to the company or to one another. For Texas limited partnerships, § 152.002(e) (added by SB 29 effective May 14, 2025) provides comparable elimination authority through the partnership agreement.
Most Texas business disputes that reach a courtroom turn on fiduciary duty in some form. After Ritchie v. Rupe, minority-shareholder claims against directors and controlling shareholders are typically asserted as derivative claims for breach of fiduciary duty rather than as direct oppression claims. The legal landscape for these claims diverged substantially in 2025: publicly-traded Texas corporations and Texas corporations that opt into § 21.419 are now governed by the codified business judgment rule with heightened pleading requirements and statutory presumptions, while closely-held Texas corporations under § 21.563, Texas LLCs, and Texas limited partnerships continue to operate under the pre-2025 common-law framework supplemented by contractual modification.
Practice guide: Breach of Fiduciary Duty in Texas