What qualifications are corporate directors required to have? What are the directors’ responsibilities?

A director must be of the age of majority, mentally competent and not be an undischarged bankrupt. The legal age of majority is 19 in BC, Nova Scotia, Newfoundland and New Brunswick and 18 in the other six provinces. Most corporations’ acts require that a certain number or proportion of the directors of a public corporation not be officers or employees of the corporation or any of its affiliates.

The directors attend periodic meetings, set policies and supervise the work of the officers of the company and pass resolutions, which are approved at the board meetings. Directors are normally responsible for:

• the appointment and supervision of officers;
• the appointment of signing authorities for banking;
• the authorization of important contracts;
• the approval of budgets, financing and plans for expansion;
• the decision to issue shares; and
• the declaration of dividends and other disposition of profits.

Directors must act honestly, in good faith and in the best interests of the corporation. Corporations’ statutes require that directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Directors may be liable for illegal acts of the corporation done with their knowledge and consent. They may be responsible for dividends that are improperly declared, as well as up to six months of wages of the employees of the corporation. They must be aware of potential conflicts of interest and may not profit from transactions entered into by the corporation without the appropriate disclosure. Directors and officers are also subject to regulatory sanctions, quasi-criminal prosecution under securities legislation, or prosecution under the criminal law.