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  • Writer's pictureAnisa Arra

Directing with Care: Navigating the Responsibilities of a Corporate Director

A director of a corporation has a legal duty to act in the best interests of the corporation and its shareholders. This duty, known as the "duty of loyalty," requires that a director put the corporation's interests ahead of their own personal interests. In addition, directors have a duty of care, which requires them to exercise reasonable care, skill, and diligence in carrying out their responsibilities. It is also important for directors to consider the impact of their decisions on all stakeholders, such as employees, customers, and the community at large, not just shareholders.


In addition to these general duties, directors also have specific responsibilities under the law. For example, they are responsible for overseeing the management of the corporation, setting corporate strategy, and making important business decisions. They are also responsible for ensuring that the corporation complies with all relevant laws and regulations.

In order to fulfill their duties and responsibilities, directors must be informed about the corporation's business and financial situation. They should also be familiar with the laws and regulations that apply to the corporation and its industry.


In order to ensure that directors are fulfilling their obligations, corporations should have effective corporate governance practices in place. These practices refer to the systems and processes by which a company is directed and controlled. They are designed to ensure that the company is managed in the best interests of its stakeholders, including shareholders, employees, customers, and the broader community.


Key elements of effective corporate governance include:

  • Regular board meetings

  • Clear roles and responsibilities for the board of directors and management

  • Transparency and accountability in decision-making

  • Fair and equal treatment of shareholders

  • Independence of the board and its committees

  • Regular communication with shareholders and other stakeholders

  • Adequate risk management and internal controls

  • Compliance with legal and regulatory requirements


Implementing and maintaining these principles can help to build trust in a company, promote long-term success, and mitigate potential risks.


It is also important to note that directors can be held liable for any actions or inactions that are not in compliance with the law, or that cause harm to the corporation or its stakeholders.

Directors of a corporation can be held liable for their actions in a variety of circumstances, including:

  • Breach of fiduciary duty: Directors have a legal obligation to act in the best interests of the corporation and its shareholders. If they fail to do so, they can be held liable for any damages resulting from their actions. For example, if a director votes to approve a transaction that benefits them personally at the expense of the corporation, they could be held liable for any losses incurred.

  • Insider trading: Directors are considered "insiders" of the corporation and are subject to insider trading laws. If they buy or sell shares of the corporation based on non-public information, they can be held liable for any resulting losses.

  • Misrepresentation: Directors can be held liable for making false or misleading statements to shareholders or the public. For example, if a director makes a false statement in an earnings call or in a filing with the OSC, they could be held liable for any losses incurred by shareholders as a result.

  • Failure to comply with laws and regulations: Directors have a responsibility to ensure that the corporation complies with all applicable laws and regulations. If they fail to do so, they can be held liable for any resulting fines or penalties.

It's important to note that being a director of a corporation is a significant responsibility, and they could be held liable in civil or criminal court, depending on the case.


In summary, directors of a corporation have a legal duty to act in the best interests of the corporation and its shareholders, as well as a responsibility to consider the impact of their decisions on all stakeholders. They have specific responsibilities under the law and must be informed about the corporation's business and financial situation. Effective corporate governance practices can help ensure that directors are fulfilling their duties and responsibilities.


If you have a business law question, contact us via the Arra Law Firm app in the App Store or Google Play or email us at reception@arralawfirm.com.

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