Author: Sarah Nadon - Law Student
Edited By: Ryan Carson
Directors and officers of a corporation are generally not liable for actions or liabilities of the corporation provided they act in good faith and in the best interests of the corporation. However, this is subject to some exceptions.
Directors may become liable where they breach their duty of care, good faith, or loyalty to the corporation. Courts are generally leery to second guess the judgement of directors and officers and afford them considerable discretion. The person alleging the directors or officers have violated their duty of care, good faith, or loyalty must establish that is the case. Further, where directors can show they have informed themselves before making a decision, acted in good faith in accordance with their fiduciary duties, and there is a rational reason for a decision, the courts will not intervene.
Statutes also make directors jointly and severally liable for certain debts. For example, the Ontario Business Corporations Act, 1990 makes directors liable for up to six months of their employee’s wages. As well federal and provincial tax statutes make directors liable for certain taxes fail to withhold, collect, or remit taxes.
Under the oppression remedy, directors and officers of a corporation may be personally liable to shareholders. An oppression claim arises against a director or an officer when the individual acts oppressively against the shareholder and that in the specific circumstances, it is appropriate to rectify the situation by making an order against the director personally. In order to benefit from the oppression remedy, the director or officer must have been personally implicated in the oppressive behaviour. The individual making the claim against the director must make specific allegations of the directors’ wrongdoings and must establish a case.
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