Conditions for being director in a corporation

The board of directors plays a fundamental role in a corporation. It has broad management powers as the main decision-making body. Throughout their term of office, the directors are called upon to manage the business and affairs of the company in its best interests.

To ensure the sound administration of corporations, the Quebec and federal legislators have established various eligibility requirements for the position ofdirector. These conditions must be maintained throughout the term of office, in which case thedirector in question risks being removed from office.

Under the Quebec regime

Under the Québec system, theBusiness Corporations Act ( B . C.A.) and the Civil Code of Québec (C.C.Q.) set out the criteria required for access to the position ofdirector. Minors, adults under tutorship or curatorship, bankrupts and persons prohibited by the court from exercising this function are not eligible to be director (art. 327 paragraph 1 C.C.Q.). Section 108 L.S.A.Q. also specifies that a legal person may not sit on the board of directors; a director is therefore necessarily a natural person.

Under the federal system

Under the federal system, the conditions of eligibility to be director are found in the Canada Business Corporations Act (CBCA). They are identical to those provided by the Quebec legislator. As under the provincial system, minors, incompetent individuals and bankrupts do not qualify to be directors (s. 105(1) CBCA). There is, however, a particularity under the federal system, namely the residency requirement of directors. Indeed, the federal legislator requires that the board of directors be composed of at least 25% Canadian residents. On the other hand, if the company has less than four directors directors, at least one of them or the soledirector , as the case may be, must be a Canadian resident (s. 105(3) C.S.A.).

Possible additional conditions

It is important to note that the articles of incorporation may sometimes provide for additional eligibility requirements. For example, they may impose the status of shareholder, although this is not a priori a prerequisite (s. 105(2) C.S.A. and s. 109 S.A.Q.). It should also be noted that under the provincial and federal systems, corporations that have gone public must comply with certain additional requirements regarding the composition of the board of directors.

Finally, contrary to what one might think, disqualification does not invalidate or annul the acts of directors. Indeed, the corporation could be held liable to its creditors for the actions of an uninhabitable director .

With the collaboration of Yousra B., student.