Ontario incorporations for small business
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Directors and Officers

Number of Directors

An Ontario corporation may have either a fixed number of directors, such as three, or a variable number of directors, such as between one and five. The number or range must be set out in the application form. This number can be changed later, although it requires an Amendment to the Articles of Incorporation. Ontario permits one director to manage and supervise the affairs of a corporation.

Residency of Directors

The majority of directors of an Ontario corporation must be ‘resident Canadians.’ If the Board of Directors has one or two directors, at least one of the directors must be a resident Canadian. According to the Ontario corporate law, a ‘resident Canadian’ is a Canadian citizen ordinarily resident in Canada, a Canadian citizen not ordinarily resident in Canada but who is a member of a special group (e.g., Foreign Affairs employee) or “a permanent resident within the meaning of the Immigration Act (Canada) and ordinarily resident in Canada.”

Qualifications for a Director

In order to be a director of a corporation, a natural person must be at least 18 years of age, of sound mind and not in a state of undischarged bankruptcy. If a director becomes bankrupt or mentally incompetent, they automatically cease to be a director.

Role of Directors

The major role of the directors is to manage the corporation. They do so ‘in the best interests of the shareholder.’ As long as they do so in good faith, using reasonable business judgment, their actions will not likely be interfered with by a court.

Election of Directors

The first directors of an Ontario corporation are those named in its Articles of Incorporation. Subsequently, the shareholders elect the directors, subject to the Articles, By-laws or a Shareholders’ Agreement.

Director Liability

In general the directors are protected from personal liability provided that they have acted honestly, in good faith and in the best interests of the corporation and provided they have exercised a minimum standard of care. Directors may also face personal liability for up to 6 months’ wages of employees together with as much as 12 months’ vacation pay. there are some notable exceptions. For example, liability may be imposed for unpaid wages, taxes deducted at source from employees, GST, and environmental obligations.
Corporate Officers

The positions and powers of officers are to be set out in the Articles, by-laws and/ or resolutions of the corporation. A corporation must have a President and a Secretary. It is possible for one person to fill all positions. A shareholder and/or director may also serve as an officer.

Usually it is the President who has overall responsibility for the running of the business. The Treasurer is the one who must issue the shares but also usually looks after the accounting. The Secretary is responsible for ensuring that minutes are taken at meetings, and the corporate records and Minute Book are properly kept.