Special-Facts Rule Law and Legal Definition

Special-facts rule refers to a principle establishing fiduciary duty to a director or an officer of a company to disclose material inside information to a shareholder. A fiduciary duty arises when a shareholder is engaged in a stock transaction under special circumstances such as:

1.when a shareholder lacks business expertise ;

2.when shares are closely held with no readily ascertainable market value; or

3.when a director or officer has instigated a transaction.

Special-facts rule is also known as special circumstances rule. Special-facts rule is an exception to the majority rule stating that a corporate director owes no fiduciary duty to stockholders, but may deal with them at arm's length. [Taylor v. Wright, 69 Cal. App. 2d 371 (Cal. App. 1945)]