Changes to legislation increase directors’ liability

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Under recent changes to B.C.’s employment legislation, directors and officers of companies are personally responsible for wages owing by the company, even if the company is in bankruptcy.

The Employment Standards Act had previously imposed personal liability on directors and officers for unpaid wages, but removed that liability if the company was placed in bankruptcy or in another formal insolvency proceeding (such as under the federal C_ompanies’ Creditors Arrangement Act_). In that event, the personal liability of directors and officers for wages ceased completely.

Under the new provisions, directors and officers remain liable for ordinary wages (including overtime pay and vacation pay) even in bankruptcy. The only limitation: if their company is in bankruptcy or receivership, directors and officers are not liable for severance pay.

Directors of troubled companies face multiple areas of personal liability for the company’s debts, including wages and taxes. Experienced, knowledgeable advice is essential to successfully navigate through these troubled waters.

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