Media company accused of breaching fiduciary duty

On Behalf of | Mar 27, 2018 | Business Litigation

Corporate board members and other officials in Colorado and throughout the United States have a responsibility, or a fiduciary duty, to act in the best interests of others; in this case, they specifically must act to preserve the value of the corporation. When corporate officials engage in insider trading or other deals that could be detrimental to the value of the company as a whole, this can be a breach of fiduciary duty to other shareholders, even when some shareholders may benefit from the arrangement.

A lawsuit that has been filed against Media News Group, the owner of 50 newspapers throughout the United States, and its major owner, Alden Global Capital, a New York hedge fund, alleges that parties have engaged in mismanagement and potential breaches of fiduciary duty. The case, filed by a minority shareholder in the corporation, seeks the disclosure of financial records and investment information. The lawsuit was filed by Solus, an investment company that owns 24 percent of the voting shares of stock in the media corporation. Alden, the majority shareholder, owns 50.1 percent of the outstanding shares in the corporation.

The lawsuit claims that various actions have been taken to benefit Alden at the potential expense of Media News Group, including the creation of a holding company in 2016 and the revision of a shareholder agreement in 2017. The suit alleges that investments undertaken by the media company have benefited Alden, but not MNG and its stockholders.

Corporate officials have a responsibility to maximize value and return for all of their shareholders, not only majority owners. If corporate funds have been directed to low-performing investments in order to aid the majority shareholder, this could be a breach of fiduciary duty. People who are facing mismanagement or a lack of disclosure from their own investments may be able to work with a business litigation attorney to pursue a claim.

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