What is the duty of care that directors owe to their Ontario corporation?

Under the Ontario Business Corporations Act, every director and officer must act honestly and in good faith with a view to the best interests of the corporation. They must also exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances. These two obligations — the fiduciary duty and the duty of care — are the twin pillars of director conduct.

The duty of care is an objective standard. Courts ask what a reasonable person with the director's knowledge and experience would have done, not simply what that director intended. Directors are expected to attend board meetings, review financial statements, ask questions, and follow up on red flags. Passive rubber-stamping of management decisions will not satisfy the standard.

For small private Ontario corporations, the duties apply fully, even when a director is also the sole shareholder. A director who also serves as officer owes these duties in both capacities simultaneously. If you are unsure whether your conduct meets the standard, speaking with a corporate lawyer before a decision is made is far easier than defending one after.