Director Liability During Bankruptcy

When a company faces insolvency or bankruptcy, the directors (and sometimes officers) of the company can face personal liability for the company's debts. Although a properly incorporated company is a separate legal person and as a general rule its creditors have no personal claim against the company's directors, there are many exceptions to this rule.

Areas of potential exposure

Examples of potential exposure include:

1. Liability under statute. Various federal and provincial laws deem directors to be liable for their company's debts. The most common are:

• Payroll deductions under the federal Income Tax Act
• Net GST under the federal Excise Tax Act
• Wages under the Provincial Employment Standards Act