Directors and their Liability

Dec 26, 2015

Some time ago, I was asked by a friend of mine to serve as a director for his company. “What will I have to do?” I asked. “Nothing. This is just on paper. No obligations.” Was his answer.

Well, this is not precise, or actually – completely incorrect.

Directors of a corporation bear personal liability for the actions of a corporation – whether they personally performed them or not. Moreover, there are various legal provisions imposing liability on corporate directors.

Directors bear personal responsibility for some of the following actions and liabilities of a corporation:

  • Liability for taxes – directors must ensure that the corporation remits HST/GST; and withholds and remits taxes from employees’ income;
  • Liability for the actions of corporation that result in pollution of Environment;
  • Personal liability to pay employees’ wages – a personal duty of director to pay salaries and vacation pay to employees in a case of the company’s insolvency;
  • Personal responsibility for various Health and Safety incidents;
  • Liabilities towards minority shareholders – Directors will be personally liable for the oppression of minority shareholders.
  • “Fiduciary Duty” – a duty of directors to act in the best interest of a corporation, and a duty to avoid personal conflict of interests;
  • General liability for the decisions of the board of directors – Directors bear personal liability for each decision of a corporation to which they did not explicitly objected.
  • Duty to creditors – Paying dividends to shareholders or redeeming shares while the corporation in insolvent is illegal, it will impose personal liability on Directors.

These are some of the actions and omissions for which directors of a corporation might be personally liable. You must remember that “personal liability” means that your personal assets, house, car, bank accounts will be used to cover corporate debts and liabilities.

At CBES.CA we will review the operations of a corporation, the scope of your duties and responsibilities and will instruct and advise you how to properly manage your actions and decisions, how to ensure that you avoid these and other consequences of the corporate actions.

Please contact us at for further information.

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