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, to the extent Texas courts recognize them and the company agreement does not modify them, by LLC managers and members.
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 stated in International Bankers Life Insurance Co. v. Holloway and quoted in Ritchie v. Rupe, 443 S.W.3d at 868, and Sneed v. Webre, 465 S.W.3d 169 (Tex. 2015), the duty "includes 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 856 (Tex. 2014). 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) lets the partnership agreement eliminate the duties of loyalty and care and the obligation of good faith if it does so expressly. § 152.006 applies subsection (e) to partnerships with exchange-listed interests and provides that other partnerships are not prohibited from adopting provisions that duplicate its effect.
Ritchie v. Rupe narrowed the statutory oppression remedy and pointed minority shareholders to other claims, including derivative suits for breach of the fiduciary duties directors owe the corporation. 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 other Texas corporations, LLCs and limited partnerships remain under common-law and statutory duties as modified by their governing documents, including the broader elimination authority SB 29 gave LLC company agreements.
Practice guide: Breach of Fiduciary Duty in Texas
Practice guide: Texas Corporate Governance