Director's Liability: How Can a Director Ensure They Are Meeting Their Obligations?

The role of directors in a company and the liability they can incur by their actions is not often the subject of mainstream news reporting. It sometimes comes up when discussing corruption in large multinational companies. However, a recent local court decision has shone a light on this infrequently discussed topic. 

In this case, a director of a company put forward a plan for the company to purchase her husband’s house for use in a charity lottery. The director then secretly arranged for her husband to repurchase the house at a discount from the lottery winners. The court held the director and her husband responsible for paying the company the difference between the amount they sold the property for and the amount for which they later repurchased it.

The backroom dealings reported in this case highlight an important aspect of a director’s obligation towards their company. Directors have what is referred to as a “fiduciary duty” towards their company. Under this fiduciary duty, a director must always do what is in the best interests of the company and should certainly never undertake any action that would provide them with personal gain at the company’s expense.

It was clear that the director in this case was unconcerned with their fiduciary duty towards the company. However, not all cases where a director’s fiduciary duty might come into play are this clear. How can a director ensure they are meeting their obligations? It is simple. They should always act honestly and with integrity. They should also disclose any conflicts of interest to the company and remove themselves from the decision-making process if they have a conflict if interest.

If you are a director of a company and you are concerned about your obligations, please get in touch with us. It would be our pleasure to set your mind at ease by helping you understand your obligations and work through any potential issues.

Have questions for us?:

If you have any questions about director’s liability you can call us at (902) 826-3070 or email us at info@highlanderlaw.ca to set up a meeting with one of our lawyers at our Tantallon law firm. You can also schedule a no commitment Issue Review Consult for $100+HST where you have the opportunity to explain your situation to a lawyer and get basic advice before deciding whether or not you'd like to retain us.  

By: Dianna M. Rievaj, MBA, LLB - Founding Lawyer

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