Canada: Duties And Obligations Of Directors: A Brief Overview

The duties and obligations of directors are at the heart of sound corporate governance. A great deal has been written over the years about how they apply in practice, and their guiding principles have been established and revisited in several major judgments. The leading decisions of the Supreme Court of Canada in Peoples1 and BCE2 among others are excellent guides on the directors' duty of care and diligence ("duty of care") and the duty of loyalty, which are provided for in the Canada Business Corporations Act3 Quebec's Business Corporations Act4, and the Civil Code of Québec.5 The purpose of this article is to provide a brief overview of these concepts and how they are applied.6 It will also canvass a few examples of statutory obligations that directors should be aware of, as in certain cases their civil or even criminal liability may be presumed.7

Duty of care

The duty of care can be summarized as follows: "exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances"8. In its decision in Peoples, the Supreme Court of Canada stated the following regarding the duty of care:

"[67] Directors and officers will not be held to be in breach of the duty of care under s. 122(1)(b) of the CBCA if they act prudently and on a reasonably informed basis. The decisions they make must be reasonable business decisions in light of all the circumstances about which the directors or officers knew or ought to have known."9

This is thus not an obligation of result, but of means. A director must be able to show that he or she took the necessary precautions and was proactive in order to ensure that the decisions made by the board are reasonable and well thought out. To do so, the director must, in particular (i) attend meetings of the board, (ii) read and analyzed all documentation received beforehand, (iii) ask the required questions, (iv) informed himself or herself about the matter being dealt with, (v) request additional information if necessary, (vi) obtain the opinion of an independent expert when relevant, etc. Thus, a court will not intervene to change a decision made by the directors if it concludes that it was reasonable. The court's role is not to determine retroactively if the best possible decision was made but whether in the specific circumstances of a given situation, the decision was reasonable.

Duty of loyalty

The duty of loyalty can be summarized as follows: "act honestly and in good faith with a view to the best interests of the corporation".10 In this regard, the following three concepts are to be taken into consideration: (1) integrity, (2) good faith11 and (3) the best interests of the corporation. In its decision in BCE, the Supreme Court stressed the importance of not confusing the interests of the shareholders, or any other stakeholders, with those of the corporation per se:

"However, the directors owe a fiduciary duty to the corporation, and only to the corporation. People sometimes speak in terms of directors owing a duty to both the corporation and to stakeholders. Usually this is harmless, since the reasonable expectations of the stakeholder in a particular outcome often coincide with what is in the best interests of the corporation. However, cases (such as these appeals) may arise where these interests do not coincide. In such cases, it is important to be clear that the directors owe their duty to the corporation, not to stakeholders, and that the reasonable expectation of stakeholders is simply that the directors act in the best interests of the corporation." 12

It is not always easy to differentiate the impacts of a decision on the corporation itself and on the various categories of stakeholders in its orbit. It is up to the directors to ensure that each stakeholder affected by a decision is treated "equitably and fairly".13 This is where the duties of care and loyalty converge: the guiding principles of the duty of care assist directors in the decision-making process, while those of the duty of loyalty help them constantly focus on the goal, i.e. a result that serves the best interests of the corporation.

Legal and statutory obligations

In addition to the duties of care and loyalty, specific obligations may also be imposed on directors, pursuant to either the corporation's enabling statute or its bylaws and certain internal policies (e.g. code of ethics). As each organization is different, a careful review of these documents is all the more necessary. There are also many statutory provisions, both provincial14 and federal15 that impose a framework for and govern the work of directors. Among these are provisions imposing obligations under taxation laws, bankruptcy and insolvency legislation, and statutes dealing with the environment and occupational health and safety, or aimed at preventing anti-competitive business practices.16


The members of the board of directors have a supervisory role with respect to the management of the corporation, a role they must discharge reasonably and with care and loyalty. To achieve this, it is useful if not necessary that directors have complementary skills and knowledge. In addition, while directors do not have a legal obligation to bring added value, diversity of outlooks may allow the board to better assist the legal person in developing and executing its strategic vision.


1 Peoples Department Stores Inc. (Trustee of) v. Wise, [2004] SCC 68, [2004] 3 SCR 461 ("Peoples")

2 BCE Inc. v 1976 Debenture holders, 2008 SCC 69 (CannLII), [2008] 3 SCR 560, ("BCE ")

3 RSC 1985, c C-44, ("CBCA"), s 122

4 CQLR c S-31.1, s. 119 (the "QBCA")

5 CQLR c C-1991 ("CCQ"), arts 321 ff

6 See also – Langlois lawyers, "Directors & Officers Liability" online

7 See also – information to come

8 Section 122(1)(b) CBCA

9 Peoples, supra, note 1, para 67

10 Section 122(1)(a) CBCA

11 Article 7 CCQ

12 BCE, supra, note 2 para 66

13 Ibid, para 82

14 QBCA (including s 450 in particular)

15 CBCA (including s 241 in particular)

16 Directors of a corporation, like all persons responsible for the management of a legal person in Quebec, are also subject to various obligations provided for in the CCQ, including those pertaining to civil liability, contracts of mandate and partnership contracts (arts 1457 ff, 2130 ff, 2186 ff CCQ, etc.).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions