Historically, the main responsibility of directors and officers of Canadian companies was to act in the best interests of their company. Accordingly, their main duty was to maximize corporate profits, and the ability to attract personal liability was, to a large extent, minimal.
Following a recent string of somewhat spectacular corporate scandals and failures in the USA and Canada, there has been a proliferation of debate and law reform designed to widen the scope of director’s duties. Since the reforms, directors owe expanded duties to shareholders, employees, creditors and other stakeholders. There has also been an increasing trend towards holding directors personally responsible for acts of the corporation, in an attempt to force directors to take increased responsibility for oversight of the company’s operations.
This paper examines some of the most common sources of liability for Canadian directors and officers and the relative risk presented. Next, the paper addresses the various types of D&O liability insurance available to directors and officers to minimize their personal liability. Finally, the paper reviews current legal issues in D&O liability insurance.
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