Legal & Compliance
Fiduciary Duty
The legal obligation to act in the best interest of another party, such as a GP's duty to their LPs or a board member's duty to shareholders.
Fiduciary duty is a legal and ethical obligation requiring one party to act in the best interest of another. In venture capital, GPs owe fiduciary duties to their LPs, board members owe duties to all shareholders, and fund administrators owe duties to the fund. These duties typically include loyalty (avoiding conflicts of interest), care (making informed decisions), and good faith (acting honestly).
In Practice
The GP disclosed the conflict of interest when their fund led a round in a company where the GP's spouse was CEO — fulfilling their fiduciary duty of loyalty to LPs.
Why It Matters
Fiduciary duty is the legal backbone of trust in venture capital. It's what prevents GPs from self-dealing, board members from insider trading, and fund administrators from negligence.
VC Beast Take
Fiduciary duty sounds abstract until it's breached. Then it becomes very concrete in a courtroom.
Related Concepts
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