What Are Your Duties And Responsibilities As A Director?
As a new business owner, you are also likely a “director” of your company. Other times, someone approaches you to sit on the board of a larger company. There are many director duties and responsibilities that you need to be aware of. The directors of a company are elected by shareholders (owners). They act as the “operating mind” of the company. Further, they are also the individuals who direct the course of business for the company. They are also responsible for appointing and mentoring officers and senior management, who handle day to day affairs of the business, approving major corporate transactions, and setting overall policies and goals for the business. Need help understanding director duties and responsibilities now in Calgary, Alberta? Call Kahane Law Office today. 403-225-8810
What Are Your Main Duties And Responsibilities As A Director?
As a director you have two over-arching director duties and responsibilities. The first duty is a fiduciary duty, otherwise known as a “duty of loyalty”. This duty is only afforded to the corporation. It requires the director to act honestly and in good faith, with a view to the best interests of the corporation. The second duty is a “duty of care”. Directors owe this duty to all stakeholders of the company (including creditors). It also requires the director to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. There are also many statutory director duties and responsibilities that are imposed on directors, for example duties pursuant to corporate law, creditor protection, tax, environmental, employment and securities legislation.
What Happens If You Fail To Properly Fulfill Your Director Duties And Responsibilities?
Despite the “limited liability” structure offered by a corporation, you can be personally liable as a director for breaching your director duties and responsibilities. For example, liability exists for either a breach of your fiduciary duty or a breach of your duty of care. You can also be personally liable if you act in a way, or with knowledge of the corporation’s breach, of a statutory liability provision (such as failure to pay corporate tax, sales tax, employee wages, or some type of creditor evasion, environmental breach or securities misrepresentation). It is extremely important to understand your director duties and responsibilities.
Do You Have Any Defences Available To You?
There are a number of defences that a director can put forward to avoid liability for director duties and responsibilities. We refer to the first defence as the “business judgment” rule. This rule provides that a court will not substitute its opinion for that of directors, with respect to a business decision, provided the decision was reasonable given what the directors knew or ought to have knew in the circumstances. To satisfy this test, a director’s decision, with respect to the company, must include a “valid business purpose”. Further, those whose legal rights face an impact from the decisions must also include a resolution decided on in a “fair and balanced” way.
Next, we refer to the second line of defence for director duties and responsibilities as the “due diligence” defence. This defence exists explicitly in the statutory provision that imposes liability on a director. It protects a director, provided they show “energetically engagement” in the company. This specifically refers to activities designed to prevent the harm in question from occurring.
Companies Can Have Lawyers Help Their Directors
The company that you are a director of can hire a lawyer to help. We can help with a directors’ lunch and learn to help explain things or help with more recurring consulting. In Calgary, the corporate and business lawyers at Kahane Law Office help you understand your duties and responsibilities as a Director. Consequently, if no longer a director, always ensure that the Alberta registry updates its records as to this information. Lastly, we help ensure that you avoid liability and also properly conduct the affairs of your business. Call today to learn more. 403-225-8810 for help in Alberta or email us directly here.