In Canada, there is a legal duty for every director and officer of a corporation to act honestly and in good faith with a view to the best interests of the corporation when exercising his/her duties, and to utilize the care, diligence and skill that a reasonably prudent person would exercise in similar circumstances. Directors and officers owe these duties to their corporations. In addition, Canadian courts have held that directors and officers also owe these duties to shareholders, employees, creditors, suppliers and consumers of their corporations, as well as to governments and the environment. Where a director or officer is found to have breached either duty, the director or officer may potentially be found to be personally liable to one or more of these parties.

It is possible for directors or officers to incur personal liability where they breach federal or provincial legislation. Directors or officers are most likely to incur personal liability specifically under federal or provincial legislation that deals with taxes, pensions, workplace or occupational health and safety, bankruptcy and insolvency, the environment, as well as corporate governance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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