The Risks of Being a Director

Despite the intensity of continuing public discussion of corporate governance issues, remarkably little attention has been paid to the liability position of individual directors. We believe this will change. Directors are increasingly realizing that "it can’t happen to me" is a dangerous and even foolhardy approach. It can happen to you, no matter how conscientious you are.

At the risk of over-simplification, there are two broad types of exposure you should consider. There is, first of all, the over-arching responsibility and related liability for honouring fiduciary obligations: acting in good faith and dealing appropriately with conflicts of interest. To this general standard, legislators and regulators in Canada, more so than in other countries, have added a host of specific statutory liabilities, which can be divided by whether or not a "due diligence" defense is available.