A corporation is a separate legal person, so its debts are not yours. Then statute carves out exceptions: unpaid wages, unremitted payroll deductions and HST, health and safety, environmental orders. Those are the ones that reach your house. Flat-fee director liability review, $1,128.87, taxes included.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $1,128.87 taxes included
Unpaid wages. Section 131 of the Business Corporations Act (Ontario) makes directors jointly and severally liable for up to six months' wages and up to twelve months' vacation pay earned while they were directors, but only after the corporation has been sued and execution against it has come back unsatisfied, or the corporation has gone into liquidation, been ordered wound up or made an assignment in bankruptcy and the wage claim has been proved. The Employment Standards Act, 2000 gives employees a second route with the same caps through a Ministry of Labour order.
Unremitted trust money. Payroll deductions withheld from employees and not sent to the CRA, and net HST collected and not remitted, were never the corporation's money. The Income Tax Act and the Excise Tax Act make directors personally liable for those amounts plus interest and penalties. This is the most common way an Ontario director ends up with a personal tax debt.
Health, safety and environment. The Occupational Health and Safety Act puts a duty on every director and officer to take all reasonable care that the corporation complies with the Act, its regulations and any orders. Prosecution is personal, fines are substantial and jail is available. The Environmental Protection Act and the Ontario Water Resources Act use the same structure for discharges.
Improper corporate acts. Paying a dividend or redeeming shares when the OBCA's solvency tests are not met can leave directors liable to restore the money. So can approving a transaction that oppresses a shareholder: a court can order a director to pay personally where the director benefited or acted in bad faith.
Two duties run through everything. You must act honestly and in good faith with a view to the best interests of the corporation, not your own and not those of the shareholder who put you on the board. And you must exercise the care, diligence and skill a reasonably prudent person would exercise in comparable circumstances.
Courts do not second-guess business decisions that turn out badly. What they examine is process: did the board get the information, ask questions, take advice where it needed advice, and record what it decided and why. A decision made on a proper record is defensible even when it loses money. A decision with no record is not.
Conflicts have their own rules. If you have a material interest in a contract with the corporation, you must disclose it and generally must not vote on it. Doing that in writing at the meeting is the whole defence. Doing it informally over coffee is not.
Due diligence is the main one, and it is available for source deductions, HST, health and safety and environmental charges. It asks what you did to prevent the failure, not what you did after it. Directors who set up a system to make sure remittances went out on time, and who checked that it worked, succeed. Directors who trusted a bookkeeper and never looked do not.
Reliance in good faith on financial statements presented by an officer or auditor, or on a report from a lawyer, accountant, engineer or appraiser, is a statutory defence in its own right. So is recording a dissent in the minutes. A director who is absent or votes against a resolution must make sure the objection is written down, or the law can treat them as having consented to it.
Resignation limits future exposure but not past exposure. For CRA director assessments the window generally runs for two years after you last ceased to be a director, so a properly documented and filed resignation is a genuine defence, and an undocumented one is worth nothing.
Keep remittances current above everything else. If cash is tight, pay source deductions and HST before almost anything else, because those are the debts that follow you personally. If the business is failing, get advice early. Directors' exposure usually crystallises in the weeks when everyone is still hoping things turn around.
Have an indemnity in the by-laws and a directors' and officers' policy that matches it. Check whether the policy is claims-made, whether run-off cover is available after you leave, and whether it excludes the things you are actually worried about, because statutory fines are generally not insurable. Keep the minute book current, because the minute book is your evidence.
Yes. Ontario law has no lesser category of decorative director. If you are on the register you carry the duties and the statutory exposure, and courts have consistently rejected the argument that a spouse or family member added for convenience did not really participate. If you are not going to act as a director, resign in writing and make sure the change is filed with the Ontario Business Registry.
Unremitted source deductions and HST. Income tax, CPP and EI withheld from pay is trust money, and so is the HST the business collected. When a company runs short those are the accounts owners quietly borrow from, and the CRA can assess every director personally for the shortfall plus interest and penalties. There is a due diligence defence, but it has to be built before the failure, not argued after it.
Not much. The Canada Business Corporations Act has closely parallel director duties and a matching wage liability provision, and the tax, health and safety and environmental exposures are the same wherever the company was incorporated, because they follow where the work is done. Choosing a jurisdiction is about name protection and filing mechanics, not about personal liability.
For some things. Policies typically respond to defence costs and civil claims for wrongful acts, and typically exclude fraud, personal profit and regulatory fines and penalties. Cover for unremitted taxes is limited or absent. Most policies are claims-made, so the policy in force when the claim is made is what matters, not the one in force when the conduct happened. Departing directors should ask about run-off cover.
Usually yes, and most by-laws provide for it. The OBCA permits a corporation to indemnify a director who acted honestly and in good faith with a view to the corporation's best interests and, in a regulatory or criminal matter, who had reasonable grounds to believe the conduct was lawful. The limitation is obvious: an indemnity from an insolvent corporation is worth nothing, and that is exactly when you need it.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.