Responsibility of directors

Transfer of shares and arm's length relationship
September 12, 2020
Transfer of shares and formalism
October 20, 2020

The fact of holding the office ofdirector within a corporation implies its share of responsibility. In fact, both corporate and tax laws provide for various cases where directors incur personal liability for the company's obligations.

For example, both the Business Corporations Act and the Canada Business Corpor ations Act provide that the directors of the corporation are jointly and severally liable to the employees of the corporation for up to six months' salary.

At the tax level, the directors may also be personally liable for the remittance of GST and QST as well as the deductions at source that are due to be paid to the tax authorities. It should be noted that thedirector targeted by such a claim may assert certain defences, including that of due diligence.

It is therefore essential thatdirector who wishes to resign from his position does so by means of a written resignation in due form submitted to the corporation. Thedirector must ensure that a current update has been filed with the Registraire des entreprises and Corporations Canada, if applicable, in order to be removed from the list of directors.

Note that the officers of the company does not have this same responsibility. A position of officer (e.g. President, Vice President, Treasurer, or Secretary) might therefore be a more appropriate avenue when one wishes to grant executive powers to an individual without burdening him or her with the significant responsibilities that come with the mandate ofdirector.

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