Director’s liability and COVID-19

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“It seems likely that my business will fail, given the COVID-19 recession we’re in. Fortunately, the business was carried on through a corporation, but as a director do I face any personal exposure despite incorporation?”


Possibly yes. Although a corporation is a separate person in the eyes of the law, and its creditors have no claim against the corporation’s shareholders or directors, there are many exceptions to this rule in which the directors may face personal liability for the corporation’s debts. For example, a number of provincial and federal statutes impose personal liability on directors where the corporation fails to pay amounts owing such as payroll deductions under the Income Tax Act and net GST owing under the Excise Tax Act. Under provincial employment legislation, directors and officers are personally responsible for wages owing by the corporation, including overtime pay and vacation pay, although directors are not liable for severance pay if the company is in bankruptcy or receivership.

Read our earlier post on “Director liability during bankruptcy” for more information.

It is best to seek the advice of insolvency professionals together with tax and other advisors to understand and limit the potential liability exposure you may be facing from the failure of your business.

Gehlen Dabbs Cash LLP is OPEN to help you and your business during these challenging times. Please contact us for assistance.

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