When potential litigation arises in the form of a
derivative action or
oppression remedy under the Canada Not-for-profit
Corporations Act, an association should determine whether the
allegations are sufficiently serious to warrant internal review. If
a director is named as a defendant, it is prudent to review at the
outset how much the association may be obliged to indemnify the
director and whether such costs are covered by the
association's director and officer liability insurance.
An association may wish to appoint a person to conduct an
internal review. It may be preferable to have counsel perform such
a review so that results are protected by solicitor-client
privilege in the event of litigation.
An association may also wish to form a litigation committee,
which preferably would not include any directors named in the
proposed action, to decide issues related to the potential
litigation. Following such review, an association should determine
whether it wishes to bring its own action against the alleged
Associations have fourteen days to respond to a notice given by
a complainant in a derivative action, after which the complainant
may apply for leave to commence the action. An association may
engage external counsel to oppose the leave application. If
leave is not granted, the complainant will not be able to pursue
the derivative action further.
Since no leave is required to bring an oppression claim,
defendant associations may wish to engage litigation counsel and
strike a review committee immediately.
Of course, there are things that can be done before claims are
made. For example, it is important to ensure that directors
and officers meet their fiduciary duties. From the
association's perspective, that could involve implementing
appropriate policies, procedures, training and review
processes. If there is a concern about a breach of duty, such
as a breach of confidentiality, misappropriation of corporate
opportunity or the like, the association should deal with the
situation as quickly as possible in accordance with the relevant
law and the association's own processes.
It is important to consider how you will respond if any unhappy
members decide to exercise their new and enhanced rights.
While it is not yet clear how a court will interpret these rights,
it is best to be prepared and in the know if and when these member
claims arise. This includes putting proper policies,
processes and procedures in place to minimize the risk of these
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.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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