Directors of an Ontario Corporation: Duties and Risk

Becoming a director of an Ontario corporation is a bigger commitment than most people expect. The role brings real power, but also duties you cannot contract out of and debts you may be asked to pay personally. Here is who qualifies, where liability starts, and how to protect yourself.

Who can be a director of an Ontario corporation?

The Ontario Business Corporations Act (OBCA) sets a low bar. A non-offering (private) corporation needs at least one individual director. An offering (public) corporation needs not fewer than three, and at least one third must not be officers or employees of the corporation or its affiliates.

A director does not have to own shares. Ownership and governance are separate under the OBCA, and a director holds shares only if the articles say so. The disqualifications are narrow.

Do Ontario directors have to be Canadian residents?

No. This is the most common stale fact still circulating about Ontario corporations.

Ontario eliminated the Canadian residency requirement effective July 5, 2021, through Bill 213, the Better for People, Smarter for Business Act, 2020. Before that, at least 25 percent of directors had to be resident Canadians, or at least one where there were fewer than four. Today, 100 percent of an Ontario corporation's directors may be non-residents.

Articles and templates written before mid-2021 still repeat the 25 percent rule as if it applied in Ontario. It does not. The confusion is federal: a Canada Business Corporations Act corporation still requires 25 percent resident Canadian directors.

For a team based outside Canada, that often decides the jurisdiction. See our overview of business structures in Ontario.

The rules described in this article reflect the Ontario Business Corporations Act as of August 2026 and can change.

Shareholders elect directors by ordinary resolution. A term expires no later than the close of the third annual meeting following the election; without a stated term, a director ceases to hold office at the close of the first annual meeting after it. If no election happens, incumbents hold over. Shareholders can remove a director by ordinary resolution at an annual or special meeting, though a class-elected director can only be removed by that class.

Director, officer or shareholder: who does what?

These roles get mixed up in small companies, but the separation matters: duties and liabilities attach to the role, not the person.

A director may be appointed to any office, and one individual can hold all three positions. See our guide on officers in Ontario.

What are a director's legal duties?

Section 134(1) of the OBCA imposes two standards.

The first is the fiduciary duty: act honestly and in good faith with a view to the best interests of the corporation. The duty runs to the corporation itself, not to the shareholder who nominated you or the investor group you represent.

The second is the duty of care: exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. That is an objective standard, and good intentions do not cure a failure to read the financials.

Directors must also comply with the Act, the regulations, the articles, the by-laws and any unanimous shareholder agreement. No contract, by-law or resolution can relieve a director of these duties or of liability for breaching them. You cannot draft your way out, which is why conflicts must be disclosed rather than hidden. A director with a material interest in a contract involving the corporation should disclose it, have it recorded, and stand back from the vote.

What can a director be personally liable for?

The corporation is a separate legal person, but several statutes reach past it and land on directors individually.

Three details matter. A director who pays a wage claim can seek contribution from co-directors liable for the same debt. CRA treats people who perform director functions without being appointed as de facto directors, so officers can be assessed even if their name never appeared on a resolution. On the environmental side, the director bears the onus at trial of proving they carried out the duty, and can be convicted whether or not the corporation was prosecuted.

How do directors protect themselves?

The statutory due diligence defence is the backbone. A director may rely in good faith on financial statements represented by an officer or in the auditor's report, and on reports from a lawyer, accountant, engineer, appraiser or other professional. Keep those reports.

Dissent is the second tool, and it is unforgiving on timing. A director at a meeting is deemed to have consented to every resolution passed, unless they have their dissent entered in the minutes, send written dissent to the secretary before the meeting ends, or deliver dissent to the registered office immediately after. An absent director is deemed to have consented unless they record dissent within seven days of learning of the resolution.

Third, resign properly. A resignation takes effect when received by the corporation or at the time it specifies, whichever is later. The two-year CRA clock only starts on a resignation you can prove, so send it in writing, keep proof of delivery, have a replacement elected and file the Notice of Change within 15 days.

A corporation may also indemnify directors and buy D&O insurance, but only where the director acted in good faith.

What must be filed and recorded?

The corporation must also keep a register of directors with names, residence addresses and the dates each person became and ceased to be a director, minutes of directors' meetings, the securities register, a register of ownership interests in land kept at the registered office, and a register of individuals with significant control updated once each financial year. See our corporate records in Canada guide, plus Ontario e-Laws and the CRA's Director's Liability circular IC89-2R3.

FAQ about directors of an Ontario corporation

When can a director be held personally liable in Canada?

Mainly for up to six months of unpaid employee wages plus twelve months of accrued vacation pay, for unremitted payroll source deductions and net GST/HST, and for environmental offences. Most claims require the creditor or CRA to first fail to collect from the company.

Does a director of a corporation need to be a shareholder?

No. Under the Ontario Business Corporations Act, share ownership and directorship are separate. A director only needs shares if the articles require it, which is unusual. Many Ontario corporations appoint independent or professional directors who own no equity in the business at all.

How many directors does an Ontario corporation need?

A private, non-offering corporation needs at least one individual director. An offering corporation needs not fewer than three, and at least one third of them must not be officers or employees of that corporation or its affiliates. Ontario directors need not be resident Canadians.

Who has more power, a director or a shareholder?

It depends on the question. Shareholders own the corporation and elect or remove directors by ordinary resolution, so they ultimately control who governs. Directors manage or supervise the management of the business and affairs, and they appoint the officers who run daily operations.

How do I properly resign as a director?

Deliver a written resignation to the corporation and keep proof of delivery, since it takes effect when received or at the time stated in it, whichever is later. Have a replacement elected, then file the Notice of Change in the Ontario Business Registry within 15 days.

Setting up your board the right way

A clean board is cheap to set up and expensive to fix later. Get the register, consents, by-laws and filings right from day one and the liability rules above stay manageable.

Lexstart handles online incorporation in Ontario with corporate records and director filings built in, and our pricing is flat. Unsure whether Ontario or federal fits? Get in touch.