Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

Other Sources of Liabilities for Directors

Other Sources of Liabilities for Directors

By:

Mann Lawyers

Posted December 5, 2018

In a recent blog, I presented the duty of care and the fiduciary duty of directors as a potential source of liabilities for them. This blog will cover other sources of liabilities for directors.

Directors of a corporation are jointly and severally liable with the corporation for certain tax arrears of a corporation, a corporation’s failure to withhold or remit certain amounts on account of employee tax/pensions/benefits, failure to withhold or remit certain amounts on account of HST or Excise Tax the corporation’s penalties for failing to file annual returns with the Provincial or federal authority responsible to receive such declaration, up to six (6) months of unpaid wages owed to employees of the corporation, the costs associated with some environmental offences committed by the corporation, and any payments made to shareholders when the corporation is nearing insolvency. Moreover, directors may attract personal liability for tortious conduct of the corporation: “Where those actions are themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own, they may well attract personal liability” (see Blacklaws v. Morrow, 2000 ABCA 175 at para.  41).

Directors may also be liable when they take on a direct supervisory role. As an example, in Nielsen Estate v Epton (Nielsen Estate v. Upton, 2006 ABCA 382, affirming 2006 ABQB 21), the plaintiff was crushed in the course of lifting a heavy industrial load with a crane. The director, Epton, had supervised the fabrication, transportation and installation of the structures from a work-site office. The employer’s other director and shareholder was responsible for office management and sales. The director’s failure to attend to the duties that were assigned to him attracted personal liability.

As a final note, please be advised that directors are also personally liable for any debts of the corporation that they personally guarantee.  We therefore advise an abundance of caution before you decide to personally guarantee any corporate debt.

Directors may consider reducing this potential liability by having the corporation purchase directors’ errors and omissions insurance on their behalf. This insurance may be difficult and costly to maintain. It is recommended that the directors take care to ensure that all of the corporation’s payments are made on time, separate funds are created to hold any remittances or employee pensions/benefits, the corporation complies with all environmental laws and regulations, and the corporation is in good financial standing prior to declaring any dividends or approving any share redemptions/repurchases. 

Should you have any further questions about director liability, I would be glad to provide you with further information.

This blog post was written by Robert P. Bissonnette, a member of the Business Law team, who is licensed in both Ontario and Quebec.  Robert can be reached at 613-369-0365 or at robert.bissonnette@mannlawyers.com.

More Resources

Blog |
Business Law
By: 
Can the use of a “thumbs-up” emoji in a text message create legally binding obligations? Last summer’s decision by the Saskatchewan Court of King’s Bench,[...]
Blog |
Real Estate
By: 

Posted June 26, 2024

A 2023 Ontario Superior Court case, Lake v Cambridge (City), 2023 ONSC 5200, confirmed that a purchaser is entitled to complete a transfer relying on[...]
Blog |
Business Law
By: 

Posted June 18, 2024

This is an update on my earlier blog posted in 2022 titled “New Requirements for Private Federal Corporations to Report Individuals with Significant Control Coming[...]
Blog |
Estate Litigation
By: 

Posted June 11, 2024

“For it is in giving that we receive.” –Francis of Assisi Many of us grew up hearing this mantra. Good people give back. Generous people[...]
Blog |
Real Estate
By: 
What is title? “Title” is a legal term for a person or company’s rights of ownership in a private property. This is different from a[...]
Blog |
Wills, Trusts and Estates, Business Law, Real Estate
By: 

Posted May 28, 2024

The recent announcement from the Federal Government regarding an increase in the capital gains inclusion rate for individuals, trusts, and corporations has sparked significant discussion.[...]

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.