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DIRECTORS - Providing the Corporation with Strategic Direction

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

The director of a corporation is an individual, typically elected or appointed by the shareholders, who serves as a member of the Board of Directors. The Board of Directors is the corporation's governing body, responsible for the management and supervision of the company's business and affairs. Directors act collectively as the board to establish corporate policies, make major decisions, and oversee the corporation's performance. They are considered fiduciaries, meaning they must act in a position of trust and owe legal duties to the corporation.

Director's Key Roles and Responsibilities

The primary responsibility of a director is one of oversight and governance, as opposed to the day-to-day management, which is handled by the corporate officers (like the CEO, CFO, etc.) appointed by the board, which tends to include:

• Supervision: Supervising the activities of the corporation and making decisions regarding those activities.

• Policy & Strategy: Determining the corporation's major business and policy decisions, such as setting corporate strategy, approving financial statements, and fixing executive compensation.

• Officers: Appointing, supervising, and removing corporate officers who are responsible for the daily operations.

• Corporate Changes: Proposing and approving significant corporate matters, such as amendments to the articles of incorporation, mergers, and the issuance of new shares (though some of these may require shareholder approval).

• By-Laws: Having the power to make, repeal, and amend the corporation's by-laws.

Director's Legal Duties

Directors are subject to two main legal duties that govern their conduct and decision-making:

1. Fiduciary Duty (Duty of Loyalty): This is a duty of trust that requires a director to act honestly and in good faith with a view to the best interests of the corporation. This duty requires them to:

• Prioritize the Corporation: Subordinate their personal business interests to those of the corporation.

• Avoid Conflicts of Interest: Not use their position for personal gain and to disclose any personal interest they may have in an existing or proposed corporate transaction.

2. Duty of Care: This duty requires a director to exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances. To satisfy this duty, a director must:

• Be Diligent: Remain informed about the corporation's activities, attend meetings, and ask questions.

• Act Informed: Make informed decisions, often by relying in good faith on financial statements or reports from corporate officers or external experts.

• Ensure Legality: Ensure that the corporation's activities are legal and comply with all applicable statutes and regulations.

A failure to fulfill these duties can expose a director to potential personal liability for corporate wrongdoings in certain circumstances.

When corporate matters require professional legal advice and strategic direction, look to the experienced legal representation that corporate clients have relied upon for over two decades. To schedule an initial consultation, contact our law firm at strong>403-400-4092 [Alberta], 905-616-8864 [Ontario] or via email at Chris@NeufeldLegal.com.