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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About Ogilvy Renault
Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at www.ogilvyrenault.com.
Ogilvy Renault joins Norton Rose Group on June 1, 2011.
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.