To be or not to be — a director. That is the question.

If you've recently become a director of a company in Canada — or are thinking about it — it’s important to understand that the title comes with responsibility. Sure, a director helps lead a company, but they can also be held personally responsible if something goes wrong. 

Let’s break down what it means to be a director in Canada.

What are the main duties of a director?

As a director, you’ll have three main duties to uphold:

1. Act honestly and in good faith: You must always put the company’s best interests first.
2. Use reasonable care and diligence: Stay informed, attend meetings, and make smart, responsible decisions.
3. Follow the law: Ensure the company complies with tax laws, employment laws, environmental rules, and more.

What is director’s liability?

Director’s liability means a director can be held personally responsible for certain things that happen in the company — especially if they break the law or don’t do their job properly.

Even though a company is considered a separate legal “person,” directors can still be personally on the hook in some situations.

Here are some common situations where a director could be held personally liable:

1. Unpaid employee wages

If your company goes bankrupt or can’t pay wages, as a director you can be held responsible for these unpaid wages and vacation pay.

2. Unpaid taxes

You could be liable if the company fails to remit:

• GST/HST
• Payroll taxes — like CPP, EI, and income tax

The CRA can go after directors personally for these amounts.

3. Environmental damage

If the company breaks environmental laws and the director knew and didn’t prevent it from happening, they could face fines or charges.

4. Wrongful acts

If, as a director, you act fraudulently, abuse your power, or knowingly break the law, you can be sued or criminally charged.

5. Insolvency (Bankruptcy / Proposals)

When your company is facing financial struggles, as a director you must act in the best interest of creditors — not just your shareholders.

Are there any protections available for directors?

Here’s the good news: There are some safeguards you can put in place to protect yourself as a director. These mitigation measures include:

Get Directors and Officers (D&O) Insurance

This helps cover legal costs and damages if you’re sued for actions taken as a director.

Be informed and stay actively engaged in your role

This looks like attending meetings, asking the right questions, and making sure the company follows the law.

Keep reliable records

Always document major decisions and detail the responsible actions that were taken.

If needed, hand in your resignation

If you discover illegal or unethical behaviour and can’t prevent or fix it, resign and make your concerns known in writing.

Don’t make this decision alone — MNP can help

Being a director is an important role. And while it comes with some legal risks, you can manage them by:

• Understanding your responsibilities
• Staying involved
• Protecting yourself with insurance
• Acting in good faith and with care

Remember: It's not about being afraid of liability—it's about being prepared and responsible.

If you're ever unsure about your duties or risks, MNP’s corporate governance team is here to answer questions, share guidance, and support you every step of the way.

To learn more, reach out to Pamela Meger, Senior Vice President, Insolvency and Corporate Restructuring, at [email protected].