Pursuant to the Business Corporations Act, the directors of a corporation have a duty to manage or supervise the management of the business and affairs of the corporation. Directors will generally not be liable for their actions in the management of the Corporation if they observe their fiduciary duties to act honestly and in good faith with a few to the best interest in the Corporation. However, as the Directors constitute to the managing mind of the corporation the legislators and the courts have over the years and continue to impose liabilities on the Directors for the wrongful acts of a corporation. As such, Directors of a corporation will be personally liable if the vote of for or consent to any resolution authorizing any of the following actions by the Corporation:
- The issue of shares for consideration other than money when the consideration is worth less than what the Corporation would have received if the share was issued for money, the liability being for the difference.
- The purchase, redemption or other acquisition of shares which results in the Corporation being insolvent or unable to meet its liabilities as they become due.
- The payment of an unreasonable commission on a sale of shares.
- The declaration or payment of a dividend which results in the Corporation being insolvent or unable to meet its liabilities as they become due.
- The provision of financial assistance to specified persons, such as shareholders and directors of the Corporation or of an affiliated corporation, or their associates, in circumstances where the Corporation is insolvent or unable to meet its liabilities as they become due.
- The payment of an indemnity to an officer or director of the Corporation in circumstances where such indemnification is not authorized by the applicable Business Corporations Act.
- The payment to a dissenting shareholder in circumstances which would result in the Corporation being insolvent or unable to meet its liabilities as they become due.
- The payment to a shareholder that is oppressive, unfairly prejudicial to, or that unfairly disregards the interests of any of the Corporation’s security holders, creditors, directors or officers.
Additionally, under circumstances where specified in various statues Directors are jointly and severally liable, subject to certain maximums, to wages payable to employees of the corporation.
With respect to tax and other remittances to the government, the Directors are liable where a corporation has failed to deduct or permit, or withhold and remit, an amount as required by the applicable income tax legislation for the wages and benefits and non-resident withholding taxes, as well as failing to withhold and remit GST and other sales taxes, and where applicable, premiums and other amounts payable under the workers compensation legislation.
Further, quasi criminal liability is imposed on a director who then following:
- Makes or assists in making a report, return, notice or other document required by the Act which contains an untrue statement of a material fact or omits to state a material fact; or
- Knowingly fails to notify the auditor of errors or mis‑statements in financial statements or fails to cause corrected statements to be prepared; or Knowingly authorizes, permits or acquiesces in a failure to comply with proxy requirements;
- Knowingly authorizes, permits or acquieces in a failure to comply with proxy requirements.