What are the 7 fiduciary duties?

The seven fiduciary duties of a director are the duty of care, the duty of loyalty, the duty of obedience, the duty of confidentiality, the duty to act in good faith, the duty to avoid conflicts of interest, and the duty not to make a secret profit. These duties define the legal and ethical obligations that directors owe to the organisations they serve, forming the foundation of sound board governance.

While the precise articulation of these duties varies by jurisdiction and legal tradition, their underlying intent is consistent: to ensure that those entrusted with governing an organisation act in its best interests, with integrity and informed judgment. The sections below address the most important questions boards and directors ask about fiduciary duty in practice.

Who do fiduciary duties apply to?

Fiduciary duties apply to anyone who holds a position of trust and authority over another party’s interests. In a corporate governance context, this includes executive directors, non-executive directors, and board members of all categories. Trustees, company secretaries, senior executives, and in some jurisdictions, committee members may also carry fiduciary obligations depending on their role and the applicable legal framework.

The key principle is not job title but function. If an individual exercises discretionary authority over decisions that affect an organisation or its stakeholders, a fiduciary relationship is likely to exist. This is particularly significant for non-executive directors, who may sometimes underestimate the weight of their obligations. Serving in a non-executive capacity does not diminish fiduciary responsibility. It simply changes the nature of how that responsibility is discharged, with greater emphasis on oversight, challenge, and independent judgment.

Boards of non-profit organisations, state-owned entities, and academic institutions carry the same fundamental obligations as their private sector counterparts. The fiduciary relationship follows the role, not the sector.

What are the 7 fiduciary duties of a director?

The seven fiduciary duties of a director are the duty of care, the duty of loyalty, the duty of obedience, the duty of confidentiality, the duty to act in good faith, the duty to avoid conflicts of interest, and the duty not to make a secret profit. Together, these duties establish the standard of conduct expected of every director, regardless of whether they are executive or non-executive.

Duty of care: Directors must apply reasonable skill, diligence, and informed judgment to their decisions. This requires active engagement with board matters and a willingness to ask difficult questions.
Duty of loyalty: Directors must place the interests of the organisation above their own personal interests at all times. Loyalty is owed to the organisation, not to individual shareholders, factions, or appointing parties.
Duty of obedience: Directors must act within the organisation’s constitution, mandate, and applicable law. They cannot authorise actions that fall outside the organisation’s stated purpose.
Duty of confidentiality: Directors must protect sensitive information obtained through their board role. This obligation continues beyond the term of appointment in most jurisdictions.
Duty to act in good faith: Directors must act honestly and in a manner they genuinely believe serves the best interests of the organisation, not to gain personal advantage or satisfy external pressures.
Duty to avoid conflicts of interest: Directors must identify, disclose, and where necessary recuse themselves from decisions in which they have a personal, financial, or professional interest that could compromise their independence.
Duty not to make a secret profit: Directors must not use their position, access to information, or organisational resources to generate personal gain without full disclosure and board approval.

These duties are not abstract principles. They carry legal weight and, when breached, expose directors to personal liability.

What is the difference between the duty of care and the duty of loyalty?

The duty of care concerns how a director makes decisions, while the duty of loyalty concerns whose interests a director serves when making them. The duty of care asks whether a director was sufficiently informed and diligent. The duty of loyalty asks whether the director was genuinely acting for the organisation rather than for themselves or a third party.

In practice, the duty of care requires directors to prepare thoroughly for board meetings, engage substantively with management, seek expert advice when needed, and apply sound judgment to complex matters. A director who rubber-stamps decisions without proper scrutiny may fall short of this standard, regardless of whether the decisions turn out to be correct.

The duty of loyalty operates at a deeper level. It governs the director’s fundamental orientation. A director who votes in favour of a transaction from which they personally benefit, without disclosure, breaches the duty of loyalty even if the transaction itself was commercially sound. The breach lies in the failure to subordinate personal interest to organisational interest.

Both duties are equally important. Boards that perform rigorous board effectiveness evaluations regularly surface gaps in both areas, often finding that process failures and loyalty conflicts coexist and compound one another.

What happens when a director breaches a fiduciary duty?

When a director breaches a fiduciary duty, they may face personal civil liability, disqualification from serving as a director, restitution orders requiring them to repay any profit made, and in serious cases, criminal prosecution. The consequences extend beyond the individual: a breach can damage the organisation’s reputation, destabilise board relationships, and expose the entity to regulatory scrutiny.

Courts in most jurisdictions take fiduciary breaches seriously precisely because the relationship between a director and an organisation is built on trust. Where that trust is violated, the law does not treat it as a minor procedural failure. Remedies available to the organisation may include injunctions to prevent further harm, recovery of profits made by the director, and damages for losses suffered.

In practice, many breaches are not immediately visible. Conflicts of interest go undisclosed. Information is shared informally. Personal gain accrues gradually. This is why robust governance structures, clear disclosure protocols, and a culture of candour at board level matter as much as the legal duties themselves. Prevention is significantly less costly than remedy.

How do fiduciary duties differ across jurisdictions?

Fiduciary duties are broadly consistent in principle across major legal systems, but they differ meaningfully in how they are codified, enforced, and interpreted. Common law jurisdictions such as the United Kingdom, Australia, South Africa, and Singapore have developed detailed case law defining directors’ duties, often supplemented by statute. Civil law jurisdictions, including many continental European countries, approach the same obligations through codified corporate law rather than judicial precedent.

In the United States, fiduciary duties are primarily governed at the state level, with Delaware corporate law setting the dominant standard for listed companies. The business judgment rule, which gives directors significant deference when they act in an informed and disinterested manner, is more explicitly developed in US law than in many other systems.

In South Africa, the Companies Act 71 of 2008 codifies directors’ duties in considerable detail, while King IV provides a governance framework that extends beyond legal compliance to ethical leadership and stakeholder accountability. In the Netherlands and Norway, directors’ duties are embedded in civil codes and reinforced by governance codes applicable to listed entities.

For multinational boards, these differences are not merely academic. A director serving on a board with subsidiaries or operations across multiple jurisdictions may be subject to overlapping or occasionally conflicting legal standards. Understanding the applicable framework in each relevant jurisdiction is a practical governance requirement, not simply a legal formality.

How can boards ensure fiduciary duties are consistently upheld?

Boards ensure fiduciary duties are consistently upheld through a combination of clear governance structures, regular evaluation, transparent disclosure practices, and a board culture that prioritises candour and accountability. No single mechanism is sufficient. Sustainable compliance requires both formal processes and the right behavioural norms at board level.

Several practices are particularly effective:

Director induction and ongoing development: New directors should receive structured induction that covers their legal duties explicitly. Ongoing development ensures that experienced directors remain current as governance standards evolve.
Conflicts of interest registers: Maintaining a formal register and requiring regular disclosure reduces the risk that conflicts go unacknowledged. The register should be reviewed at each board meeting, not only when a specific issue arises.
Board effectiveness evaluations: Periodic external evaluation provides an objective view of whether the board is functioning in a manner consistent with its fiduciary obligations. This includes assessing decision-making quality, information flows, and the independence of directors in practice, not merely on paper.
Clear escalation protocols: Directors need to know how to raise concerns about potential breaches without fear of reprisal. A culture where challenge is welcomed rather than suppressed is a genuine governance safeguard.
Legal counsel access: Directors should have direct access to independent legal advice when needed, particularly on matters involving potential conflicts or novel legal questions.

The tone set by the Chair is decisive. Where the Chair models rigorous engagement, honest disclosure, and a genuine commitment to the organisation’s long-term interests, the rest of the board is more likely to follow.

How The Board Practice helps boards uphold fiduciary duties

Fiduciary duty is not simply a legal standard to be met. It is a governance posture to be cultivated. The Board Practice works with boards to ensure that the conditions for consistent, informed, and independent decision-making are genuinely in place, not assumed.

Through its Board Effectiveness Evaluation service, The Board Practice provides:

Structured assessment of whether board dynamics, information flows, and decision-making processes support directors in fulfilling their duties
Honest, frank feedback on areas where individual or collective conduct may fall short of the required standard, delivered without bias and without agenda
Forward-looking development plans, typically spanning two to three years, designed to strengthen governance practice in a manner that is specific to the board’s context and strategic environment
Benchmarking across industries and geographies, drawing on experience from more than 120 board effectiveness assignments across multiple continents

The goal is not to produce a compliance report. It is to give the board a clear-eyed view of where it stands and a credible path to where it needs to be. If your board is ready for that conversation, contact The Board Practice to discuss how an evaluation can be tailored to your organisation’s specific governance requirements.