Duty of Loyalty is a fundamental aspect of the fiduciary duties that are owed by the trustees and directors in the Delaware statutory trust industry. This is based on Delaware law and it implies that those in a position of trust must act in the best interests of the trust and its beneficiaries, rather than in their personal interests.
The duty of loyalty can manifest in several ways, such as:
- Conflicts of Interest: Those subject to the duty of loyalty must avoid situations where their personal interests conflict with those of the trust. For instance, they cannot engage in self-dealing or use the trust’s assets for their personal benefit.
- Confidentiality: Trustees and directors are privy to sensitive information and have an obligation to not disclose this information for personal gain or in a manner that would harm the trust.
- Good Faith and Fair Dealing: The individuals must act honestly and fairly towards the trust and its beneficiaries. They cannot engage in acts that would harm the trust or benefit themselves at the expense of the trust.
- Acting in the Best Interests of the Trust: All actions taken by the trustees or directors should be with the aim of benefitting the trust and its beneficiaries, even if these actions do not benefit the individuals themselves.
The exact specifics of the duty of loyalty can vary based on the terms of the trust agreement, but the overall principle is that those in positions of trust must prioritize the interests of the trust over their own. Failure to adhere to the duty of loyalty can result in legal consequences, including the possibility of being held personally liable for any losses incurred by the trust as a result of the breach.