Shareholder claims and corporate bankruptcies are on the rise.
Litigation in these areas represents a large portion of the
liability facing directors and officers and is therefore a
legitimate concern for anyone asked to serve as a director.
Directors are being named as co-defendants, along with
corporations, in more and more class actions. These proceedings
enable a single representative to file suit, often claiming
substantial damages, on behalf of hundreds or thousands of
individuals with a similar interest.
In addition, governments are increasingly suing corporate
directors under statutory provisions that allow them to recover a
multitude of sums whose payment is provided for by law, such as
unpaid source deductions on employee wages and non-remitted sales
taxes. Employees themselves also have a recourse against directors
in the event of non-payment of wages and vacations owing to
insolvency or other reasons.
It is essential for directors to limit their liability by making
sure they comply with their statutory duties and for the
corporation to purchase a liability insurance policy for their
benefit. Any measures in place should be reviewed regularly to
ensure that they are adequate and afford the best possible
protection. The last section of this brochure contains a useful
checklist for this purpose.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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