Under Ontario’s Business Corporations Act, a corporation has the rights, powers and privileges of a natural person. This means that a corporation can sue and be sued and will own assets and incur liabilities. Operating a business through a corporation can shield a business owner from the potential liabilities that will arise in the ordinary course of operating a business. There are a number of instances, however, where this shield is ineffective or can be pierced. There are also a number of laws that impose specific duties and potential liabilities on directors and officers. The latter topic will be discussed in a follow-up post.
Generally, directors and officers will incur personal liability where they have participated in a fraud by the corporation or the corporation has been formed for some other improper purpose. As a result, there is a body of case law that has allowed litigants to “pierce the corporate veil” of a corporation and proceed against its directors and officers in circumstances where the court considers it just. A review of these cases will be undertaken in a future blog.