A director of a company that operates multiple KFC restaurants was personally ordered to pay more than $5,000 of unpaid vacation pay to the company’s employees. Following his failure to pay, he was ordered to pay $10,000 of fine.
Now he owes more than $15,000 and the amount will continue to rise!
This is another case (among many others) in which a personal liability is being imposed on a company’s director for the operations of a company. The increasing amount of similar cases showcases the lack of “independent legal entity” and the importance of company’s owners and directors to understand the real extent of their liability and responsibilities and to manage their company in accordance with this understanding.
Currently, directors of a corporation are personally liable for the following actions/debts of a corporation (and the list is absolutely non-conclusive):
- Unpaid wages and employment related payments;
- Corporate income tax and HST/GST;
- Source deductions (including employer and employee remittances);
- Environmental damages;
- Health and Safety issues and incidents;
- There are many other provisions in various pieces of legislation…
Some of these liabilities cannot be escaped and every corporate director must ensure that company prevents or avoids certain actions and omissions. Others could be mitigated and properly managed in order to ensure that directors will not be found liable.
One of the most important tools for prevention and mitigation of personal exposures of directors is a proper corporate compliance. Establishing and enforcing proper compliance systems, policies and procedures will substantially increase the protection of a company and its directors and will assist in prevention of situations in which personal liability will be imposed on directors of a company.
At CBES, we assist businesses to establish proper compliance systems and train managerial team in implementation and enforcement of this system in order to assist businesses and their directors to avoid unpleasant situations like the one described above.
For more information, contact us at email@example.com