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
(including withholding to non-residents and payroll source
deductions) or GST. Directors may also be jointly and severally
liable for unpaid wages under employment legislation.
This makes it very important to determine when a director has
In the recent case of Canada v. Chriss("Chriss"), the Federal Court of Appeal found
that an intention to resign, as expressed by two directors to their
husbands who instructed the corporation's lawyer to prepare the
resignation, and as demonstrated by an unsigned resignation in the
lawyer's file, did not satisfy the necessary preconditions of
an effective resignation in the Ontario Business Corporations
Under the Ontario Business Corporations Act a
director's resignation is only effective at the later of when
the resignation is received by the corporation and the effective
date. The Alberta Business Corporations Act contains a
Therefore, to be effective, a resignation must be signed and
delivered to the corporation's registered office. We recommend
that the resigning director ensure the resignation is also properly
recorded in the corporation's minute book and a change of
directors is appropriately filed with Corporate Registries.
In an arm's length sale with lawyers involved, this is
likely to be done correctly. The previous directors will not want
to be liable for the actions of the arm's length new directors
for a corporation they no longer have any connection to. However,
in the normal course of business for a small closely held
corporation, sometimes these formalities can be forgotten
(especially when the directors do not deal at arm's length).
For example, when one spouse resigns and another continues to be a
director as in this case or a child takes over for a parent.
For the taxpayers in Chriss, this failure to properly
comply with the formalities meant they were found to be jointly and
severally liable for income tax withholdings the corporation was
responsible for after they believed they had resigned. If you are
planning to resign or believe you have already resigned as a
director, it is important to make sure the proper steps are
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.
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