Unlike a shareholder, a director can be held liable for
certain liabilities of the corporation. These liabilities are based
on certain legislative provisions. Examples of liability are found in:
(1) the Excise Tax Act (of Canada) which provides
that directors are liable for unremitted Goods and Services Tax of
the corporation; and
(2) the Income Tax Act (of Canada) which provides that directors may
be liable for employee’s withholdings that are not remitted
by the corporation.
There are also situations whereby a director can be responsible
for corporate employee’s wages and certain environmental infractions.
These and many other types of director liabilities can usually be avoided
by a director if the conduct in question is determined to be appropriate
in the circumstances (traditionally known as the “due diligence”
defence). An individual should avoid consenting to become a director
prior to familiarizing themselves with the respective responsibilities
that the position holds and the potential director personal liabilities.
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The general opinions expressed herein are for information
purposes only and are not to be relied on. Individuals are encouraged
to seek legal advice as it relates to their specific fact scenario to
ensure they are fully aware of their legal rights and obligations.
