Directors

A director of a corporation is required to be an individual of not less than eighteen years of age. Individuals who have been found by a court to be of unsound mind or who have the status of bankrupt are disqualified from being directors. For Ontario corporations, a majority of directors must be resident Canadians or if there are only one or two directors that director or one of the two directors must be a resident Canadian. A resident Canadian includes a Canadian citizen ordinarily resident in Canada or a permanent resident within the meaning of the Immigration Act (Canada). At present, a permanent resident becomes eligible to apply for Canadian citizenship after three years.

Under the Ontario Business Corporations Act ("OBCA"), the directors of a corporation are required to manage or supervise the management of the business and affairs of the corporation. In the absence of an agreement amongst all the shareholders of a corporation the management of a corporation's business and affairs is the prerogative of the directors, not of the shareholders. The shareholders are the corporation's owners, but not the corporation's managers. However, ownership and operational control can be combined if a person is both a shareholder and a director, a common arrangement in corporations with few shareholders.

The OBCA imposes two general types of obligations upon directors in connection with their management of a corporation's business and affairs:

1. An obligation to act honestly, in good faith and in the best interests of the corporation. This principle prohibits directors and officers from putting themselves in a position where their duty to act in the best interests of the corporation and their self-interest are in conflict.
   
2. A minimum standard of care. A director and officer is required to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Failure to meet this standard exposes a director or officer to liability to the corporation for damages arising out of her or his negligence or bad faith.

In addition to the above, there are other specific legal liabilities imposed upon directors personally. Many of these are imposed upon directors for making errors which would have an adverse effect on the financial position of the corporation. (Some examples include liability for six months' wages of employees and one year of vacation pay, liability for certain unauthorized payments set out in the Income Tax Act, and liability for unpaid government remittances like GST, workers compensation, income tax, etc.)

The directors act by passing resolutions either at a meeting or unanimously in writing. A person ceases to be a director of a corporation if he or she resigns, dies, becomes disqualified or is removed.

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