Fiduciary duties are among the most demanding legal obligations in Texas business law. When someone accepts a fiduciary role – as a business partner, corporate director or officer, LLC manager, trustee, or agent—they take on a legal responsibility to act in the best interests of the people who depend on them. When they don’t, the consequences can be severe: personal liability, disgorgement of profits, and court orders that unwind entire transactions.

For Houston-area business owners, understanding what a fiduciary breach actually looks like in practice matters as much as understanding the legal definition. This article walks through the most common types of fiduciary duty violations seen in Texas business disputes -what they look like, why they are actionable, and what remedies are available under Texas law.

For background on the duties themselves, see our article What Is a Fiduciary Relationship? For specific issues involving corporate officers and directors, see Director and Officer Liability for Breach of Duty. And for a focused look at one of the most frequently litigated obligations, see Understanding the Duty of Loyalty.

If you believe a fiduciary has violated their obligations to you or your business, our Business Law Solutions page explains how Anunobi Law can help.

1.  Self-Dealing and Interested Transactions

Self-dealing is one of the most common and most straightforward fiduciary breaches. It occurs when a fiduciary enters into a transaction with the entity they serve—a corporation, partnership, or LLC-in a way that benefits them personally, without proper disclosure and independent approval.

How It Typically Looks

A corporate director who sells commercial property to the corporation at an above-market price, without disclosing that they own the property through a related LLC, has engaged in self-dealing. A partner in a Houston-area business who awards a lucrative service contract to their own separate company-without telling the other partners-has done the same. A trustee who hires their own construction firm to perform work on trust property, billing at inflated rates, is self-dealing even if the work is ultimately performed.

The core problem is not that a fiduciary benefits from a transaction—many transactions involve fiduciaries who have some stake. The problem is undisclosed or unfair benefit. Under Texas law, self-dealing transactions face heightened scrutiny and the fiduciary bears the burden of proving both fair process and fair price.

WHAT “FAIR PROCESS” REQUIRES IN TEXAS
Full disclosure of the fiduciary’s interest · Approval by disinterested parties (not the conflicted fiduciary) · Terms that the entity would accept from an unrelated third party · Documentation showing the process was followed

Failing to meet this standard exposes the fiduciary to liability for any difference between what the entity paid and fair market value, disgorgement of personal profits, and rescission of the transaction entirely.

2.  Usurping Business Opportunities

The corporate opportunity doctrine-recognized under the Texas Business Organizations Code and Texas common law-prohibits fiduciaries from taking for themselves business opportunities that belong to the entity they serve.

How It Typically Looks

A director of a Houston real estate company who learns through their board position about an off-market commercial property and quietly purchases it personally, rather than presenting it to the company, has usurped a corporate opportunity. A managing partner of a Sugar Land professional services firm who approaches a major prospective client on behalf of their own side business-a client the firm was actively pursuing—has diverted an opportunity that belonged to the partnership.

Courts in Texas evaluate these claims by asking whether the opportunity was within the entity’s line of business, whether the entity had an existing interest in or reasonable expectation of pursuing it, and whether taking the opportunity would be fair under all circumstances. These are fact-intensive inquiries, and the outcomes often turn on what the fiduciary knew, when they knew it, and whether they disclosed anything before acting.

The Proper Process When a Fiduciary Wants to Pursue an Opportunity Personally

• Present the opportunity fully and honestly to the board, partnership, or other governing body
• Disclose the personal interest in pursuing it
• Recuse from the vote or decision
• Allow disinterested parties to decide whether the entity wants to pursue it
• Proceed personally only after a proper, documented decision that the entity is not interested

Fiduciaries who skip this process-or who act before it is completed—face liability for all profits derived from the opportunity, even years after the fact.

3.  Competing with the Entity You Serve

The duty of loyalty generally prohibits fiduciaries from competing with the entity they serve without disclosure and consent. This applies to business partners, corporate officers, LLC managers, and other fiduciaries. For a detailed analysis of how Texas courts apply this prohibition, see our article Understanding the Duty of Loyalty.

How It Typically Looks

A partner in a Katy construction company who secretly forms a competing LLC and begins bidding on the same projects is competing with the partnership in violation of their fiduciary duty. A corporate officer of a Houston technology firm who starts a competing venture on nights and weekends—soliciting the company’s clients and using relationships built through their employment—has breached loyalty obligations regardless of whether the employer has discovered any actual harm yet. An LLC manager in The Woodlands who establishes a rival business in the same industry and uses their insider knowledge to position the new company advantageously is competing in breach of their duties.

Texas courts distinguish between permissible preparation to compete—researching a new field, quietly saving money, consulting an attorney about a future venture—and impermissible active competition while still serving as a fiduciary. The line is crossed when the fiduciary takes steps that directly compete with the entity or that use the entity’s resources, relationships, or confidential information to build the competing business.

Remedies frequently include disgorgement of all profits from the competing venture, forfeiture of compensation earned while engaged in disloyal conduct, and damages for any actual harm to the entity.

4.  Misappropriation of Assets and Funds

The most direct form of fiduciary breach involves taking money or property belonging to the entity for personal use-without authorization. While this conduct may also constitute criminal theft or embezzlement, it is independently actionable as a civil breach of fiduciary duty, regardless of whether criminal charges are pursued.

Common Forms in Texas Business Disputes

• Direct fund transfers: A corporate treasurer who moves company funds to personal accounts, or a partner who writes partnership checks to pay personal expenses.
• Unauthorized compensation: A managing partner who pays themselves fees or bonuses beyond what the partnership agreement permits, or a director who approves their own excessive compensation without board authority.
• Unauthorized loans: A corporate officer who approves loans to themselves or family members without board approval, without proper documentation, or on favorable terms the company would not offer to third parties.
• Improper use of property: A trustee who uses trust assets to fund personal investments, even with an intent to repay, commits a breach by making unauthorized use of assets that are not theirs to deploy.

An important point: the intent to repay does not eliminate the breach. Unauthorized use of fiduciary assets is a violation at the moment it occurs, regardless of whether repayment eventually happens. Houston business litigation involving misappropriation often involves forensic accounting to trace diverted funds, particularly when the misappropriation has been ongoing or concealed through accounting manipulation.

5.  Failure to Disclose Material Information

Fiduciaries have a duty to share material information with those they serve—information that a reasonable person would want to know when making decisions about the entity. Withholding such information, even without any other affirmative misconduct, constitutes a breach.

How It Typically Looks

A director who knows they have a financial interest in a transaction being considered by the board, but says nothing, breaches their disclosure obligation regardless of whether the transaction itself is fair. Partners in a Pearland business who conceal serious financial problems from each other-declining revenue, unpaid debts, or threatened litigation-breach their mutual duty of disclosure. A trustee who fails to inform trust beneficiaries about material changes to trust assets or pending legal claims violates their duty of transparency.

Active concealment is a more serious form. A fiduciary who manipulates financial statements to hide losses, provides reports that omit critical facts, or deliberately works to prevent other parties from discovering problems commits what may be both a fiduciary breach and fraud. See our article on 

Active concealment is a more serious form. A fiduciary who manipulates financial statements to hide losses, provides reports that omit critical facts, or deliberately works to prevent other parties from discovering problems commits both a fiduciary breach and potentially fraud. The duty of disclosure also extends to correcting prior statements that have become misleading due to changed circumstances—remaining silent when you know others are relying on outdated information you have a duty to update is itself a breach.

PRACTICAL NOTE
The duty of disclosure does not only apply to outright lies. In Texas, a fiduciary’s silence-when they know that another party is acting on materially incomplete or outdated information-can itself constitute a breach. Fiduciaries cannot exploit information asymmetry to their personal advantage.

6.  Negligent Management and Oversight Failures

Fiduciaries owe not only a duty of loyalty but a duty of care—meaning they must manage affairs with reasonable competence, diligence, and judgment. Significant failures in oversight, or complete abdication of fiduciary responsibilities, can breach this duty even without any improper personal benefit.

When Oversight Failures Cross the Line

Directors who never attend board meetings, never review financial information, and rubber-stamp every management proposal without meaningful inquiry may breach their duty of care. This is not mere poor judgment—it is a failure to perform the role at all. The Texas Business Organizations Code imposes affirmative duties on directors and officers; they cannot shield themselves from liability simply by staying uninvolved.

Trustees who fail to invest trust assets appropriately—keeping all funds in non-interest-bearing accounts when investment is clearly warranted, or failing to diversify an overly concentrated portfolio—may breach the prudent investor standard under Texas trust law. Partners who ignore critical operational problems, allow required licenses or permits to lapse through inattention, or fail to take reasonable steps to protect partnership assets may breach their duty of care to the partnership.

At the corporate level, oversight failures can give rise to what are sometimes called Caremark-type claims in Texas—claims that directors failed to implement reasonable compliance and internal control systems, or ignored clear warning signs of misconduct. These claims require showing that the failure to act was not merely negligent but reflected a conscious disregard of known risks. For details on how these claims affect directors and officers specifically, see Director and Officer Liability for Breach of Duty.

7.  Breach of Confidentiality

Fiduciaries routinely have access to sensitive information—financial records, customer lists, strategic plans, trade secrets, personnel information—that the entity expects them to protect. Using that information for personal benefit, or sharing it with outsiders without authorization, is a fiduciary breach that can cause substantial and lasting harm.

How It Typically Looks

A director of a Houston energy company who shares confidential acquisition plans with a competitor has breached both confidentiality duties and the duty of loyalty. An officer who uses customer contact information—developed and maintained at the company’s expense—to solicit those customers for a personal business venture has misappropriated confidential business assets. A partner who discloses the partnership’s financial terms, client relationships, or proprietary methods to outsiders without authorization breaches their duties to the partnership.

Confidentiality obligations generally persist after the fiduciary relationship ends. Former directors, officers, partners, and managers who continue to use or disclose confidential information learned during their service may remain liable even after their formal roles conclude. When the information constitutes a trade secret under Texas law—the Texas Uniform Trade Secrets Act—additional remedies are available, including injunctive relief and potentially exemplary damages for willful misappropriation.

8.  Improper Related-Party Transactions

Transactions between an entity and parties related to its fiduciaries—family members, close friends, affiliated businesses—require the same scrutiny as direct self-dealing. The risk is that the fiduciary’s judgment will be influenced by personal loyalty rather than the entity’s best interests, even when the fiduciary does not personally profit.

How It Typically Looks

A corporate officer who arranges for the company to hire their spouse’s consulting firm, without disclosing the relationship or obtaining independent approval, breaches fiduciary duties even if the consulting fees are reasonable. A trustee who invests trust assets in a business venture owned by their adult child—without full disclosure to beneficiaries and independent authorization—violates trust law regardless of the investment’s merit. A managing partner in a Missouri City business who steers a major contract to a company owned by a close friend, at terms more favorable than the partnership could obtain from an arms-length competitor, commits a breach even though they have no ownership interest in the friend’s company.

The key principle is that fiduciaries cannot allow personal relationships to cloud the business judgment they owe to the entity. The solution is not to prohibit all business with related parties—it is to require full disclosure, independent review, and proof that the transaction is on terms fair to the entity.

9.  Oppression of Minority Stakeholders

In closely-held Texas businesses—LLCs, partnerships, and closely-held corporations common throughout the Houston area—controlling owners sometimes owe fiduciary duties to minority owners. When controlling owners use their authority to unfairly squeeze out, freeze out, or disadvantage minority interests, they breach those duties.

Common Patterns of Minority Oppression

• Refusing to make distributions to minority owners while paying controlling owners excessive salaries and bonuses—effectively excluding minority owners from any return on their investment
• Excluding minority owners from management roles they previously held, or removing them from day-to-day operations without legitimate business justification
• Denying minority owners access to the company’s financial records and books—rights they may be entitled to under the Texas Business Organizations Code
• Making major business decisions specifically designed to harm minority interests, such as selling assets to related entities at below-market prices
• Diluting minority ownership through unauthorized issuance of additional interests

Minority owners in Houston-area closely-held businesses are particularly vulnerable because they typically cannot sell their interests on an open market and depend on the controlling owner’s fair dealing. Texas law recognizes this vulnerability. Remedies for oppression can include a court-ordered buyout of the minority interest at fair value, injunctive relief against the oppressive conduct, damages for harm suffered, and in serious cases, judicial dissolution of the business entity.

10.  Remedies Available for Fiduciary Duty Breaches in Texas

Texas courts have broad authority to craft remedies for fiduciary duty breaches. The available remedies reflect the law’s dual goals: making the injured party whole and removing any benefit the breaching fiduciary obtained from their misconduct.

Monetary Damages

• Actual losses caused by the breach—including the difference between what the entity paid and fair value in self-dealing transactions
• Lost profits the entity would have earned but for the breach
• The value of business opportunities diverted by the fiduciary
• Consequential damages flowing from the breach
• Punitive damages, where the breach was egregious or involved fraud

Disgorgement of Profits

Courts can require a breaching fiduciary to turn over all profits they obtained through the breach—regardless of whether the entity can prove a corresponding loss. This remedy is particularly powerful: a fiduciary who usurped a business opportunity and made $800,000 may be required to disgorge that entire amount even if the entity cannot prove it would have earned the same sum. The purpose is to eliminate any financial incentive for disloyalty.

Equitable Remedies

• Rescission—unwinding transactions tainted by the breach
• Constructive trust—the court treats property obtained through the breach as held in trust for the entity
• Accounting—tracing all funds and profits obtained through fiduciary misconduct
• Injunctive relief—stopping ongoing breaches or preventing future harm
• Removal of the fiduciary from their position
• Appointment of a receiver to protect assets

Personal Liability

A critical point for Houston-area business owners: breach of fiduciary duty frequently results in personal liability that is not shielded by an LLC or corporate structure. The limited liability protection that these entities provide applies to business debts and obligations—not to intentional wrongdoing by the fiduciary themselves. Partners, LLC managers, and corporate officers who breach their duties can be held personally responsible for resulting damages.

Attorney’s Fees

In many Texas fiduciary duty cases, the prevailing party can recover attorney’s fees and costs, particularly in derivative actions brought on behalf of the entity. This is a significant consideration given the expense of business litigation.

Frequently Asked Questions

Questions Houston business owners ask about fiduciary duty breaches and what to do when they occur.

Q  How do I know if what my partner is doing actually constitutes a fiduciary breach?

The core question is whether the person owed you a fiduciary duty and acted in a way that prioritized their interests over yours or the entity’s. Formal fiduciary relationships—partners, corporate directors and officers, trustees, agents—create these duties automatically under Texas law. If someone in one of those roles is secretly benefiting from transactions, taking business opportunities, competing with the entity, or withholding material information, there is likely a breach. The specific facts matter enormously in these cases. A confidential consultation with a business litigation attorney is the most reliable way to assess whether you have an actionable claim.

Q  My business partner has been paying themselves extra money from our company account without telling me. Is that a breach?

Almost certainly yes—if they lacked authorization for those payments. Partners in a Texas general partnership or LLC owe each other fiduciary duties and must account to the partnership for any property or benefit derived from partnership business. Unauthorized withdrawals or self-awarded compensation are among the most common forms of misappropriation we see in Houston-area partnership disputes. The key facts are: what did the partnership agreement authorize, what did your partner take, and was it disclosed? If they took money beyond what was permitted and did not disclose it, you likely have both a breach of fiduciary duty claim and a breach of the partnership or operating agreement.

Q  Can a fiduciary breach be both a civil claim and a criminal matter?

Yes. Conduct that constitutes a fiduciary breach—particularly misappropriation of funds, embezzlement, or fraud—may simultaneously be a civil wrong and a criminal offense. The civil case and the criminal investigation are separate proceedings with different standards of proof and different objectives. A criminal prosecution does not prevent you from pursuing civil remedies, and a civil case can proceed even if prosecutors decline to charge or if a criminal case is resolved without a conviction. In practice, a civil fiduciary duty claim is often the more effective route to recovering financial losses, since the civil remedies (damages, disgorgement, constructive trust) are specifically designed to restore what was taken.

Q  The breach happened two years ago and I only recently found out. Can I still sue?

Possibly, and this is exactly why you should consult an attorney promptly rather than assuming you have missed your window. Texas generally applies a four-year statute of limitations to breach of fiduciary duty claims. Critically, the discovery rule applies in fiduciary cases: the limitations clock does not necessarily start running when the breach occurred, but when you knew or reasonably should have known about it. Because fiduciaries often conceal their misconduct—making it genuinely difficult for the beneficiary to learn of the breach—Texas courts have been willing to toll the limitations period in appropriate cases. However, the analysis is fact-specific. The longer you wait after discovering the breach, the more risk you face on limitations grounds, so immediate consultation is important.

Q  What is disgorgement and why is it important in fiduciary cases?

Disgorgement is a remedy that requires the wrongdoer to surrender all profits they made through a fiduciary breach, regardless of whether the entity suffered a corresponding loss. For example, if a partner diverted a business opportunity and made $600,000 in profit from it, a court can order disgorgement of that entire $600,000 to the partnership—even if the partnership cannot prove it would have earned exactly that amount. Disgorgement serves a core policy goal: it removes the financial reward for disloyalty. Without this remedy, a fiduciary who breaches their duty but is caught could simply return what was taken and keep everything else. Disgorgement prevents that result and makes breach genuinely unprofitable.

Q  Our LLC operating agreement doesn’t say anything about fiduciary duties. Does that mean there aren’t any?

No. Texas law imposes default fiduciary duties on LLC managers and, in some circumstances, members, regardless of what the operating agreement says. The Texas Business Organizations Code sets baseline obligations that apply when the company agreement is silent. While Texas allows LLC agreements to modify or limit some of these duties, the company agreement cannot authorize bad faith, willful misconduct, or knowing violations of law. In many Houston-area LLC disputes, the absence of clear fiduciary duty provisions in the operating agreement does not eliminate the duties—it just makes the scope of those duties depend on Texas statutory defaults and case law, which can lead to more uncertainty and more litigation. A well-drafted operating agreement is the best way to define these obligations clearly.

Q  I’m a minority owner and the majority is excluding me from all decisions and information. What can I do?

Minority oppression in closely-held businesses is a recognized basis for legal action in Texas. If controlling owners are denying you access to financial records, excluding you from management, refusing to make distributions while paying themselves excessive compensation, or otherwise using their control to harm your interests, you may have claims for breach of fiduciary duty and oppression. Remedies can include a court-ordered buyout of your interest at fair value, injunctive relief compelling access to records and information, and damages for harm suffered. Texas law also gives members of an LLC and partners in a partnership specific statutory rights to access certain business records—rights that can be enforced independently of any fiduciary duty claim. If you are in Harris County, Fort Bend County, Brazoria County, or the surrounding area and facing this situation, call Anunobi Law at 832-538-0833 for a confidential consultation.

Q  If I suspect a fiduciary breach, what should I do right now—before calling an attorney?

Several steps will protect your position without tipping off the breaching party:

• Preserve and copy all financial records, bank statements, accounting files, and communications you currently have access to
• Document what you know and when you learned it—a clear timeline helps your attorney assess the statute of limitations and the strength of your claims
• Do not confront the person you suspect yet—premature confrontation can cause evidence to disappear or give the other party time to prepare defenses before you have legal representation
• Do not transfer any assets or take any action that could appear retaliatory or unauthorized—your conduct matters too
• Write down the specific conduct that raised your concerns, with dates and amounts where you know them
• Then call an attorney—the faster you act, the more options you have

Related Articles

• What Is a Fiduciary Relationship? — The legal foundation: what fiduciary duties are and how they arise under Texas law

• Director and Officer Liability for Breach of Duty — Corporate-specific analysis of personal liability for directors and officers

• Understanding the Duty of Loyalty — A focused look at the most frequently litigated fiduciary obligation

• Business Law Solutions — How Anunobi Law represents clients in fiduciary duty and business litigation matters

Serving Houston and Surrounding Communities

Anunobi Law handles fiduciary duty litigation for business owners, partners, shareholders, LLC members, and executives throughout the greater Houston metropolitan area. We practice in Harris County, Fort Bend County, Brazoria County, Montgomery County, and Galveston County courts.

Houston (Harris County)	Katy (Fort Bend / Harris Co.)	Sugar Land (Fort Bend Co.)	The Woodlands (Montgomery Co.)
Pearland (Brazoria / Harris Co.)	Missouri City (Fort Bend Co.)	Conroe (Montgomery Co.)	Spring (Harris Co.)
Cypress (Harris Co.)	Stafford (Fort Bend Co.)	League City (Galveston Co.)	Baytown (Harris Co.)

Our office is located at 1415 North Loop West, Ste. 1140, Houston, TX 77008. We serve clients across the Houston area in person and remotely. Call 832-538-0833 to schedule a confidential consultation.

Suspect a Fiduciary Duty Breach? Act Before More Harm Is Done.
Anunobi Law represents Houston-area businesses, partners, shareholders, and executivesin fiduciary duty litigation across Harris, Fort Bend, Brazoria, and Montgomery Counties.
📞 832-538-0833  · 
1415 North Loop West, Ste. 1140, Houston, TX 77008
All consultations are 100% confidential.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Every fiduciary duty case involves unique facts and circumstances that significantly affect the applicable law and available remedies. For advice regarding your specific situation, please consult with a qualified Texas attorney. No attorney-client relationship is formed by reading this article.