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Directors and Officers Liability

​​​​Directors and officers have a duty to exercise due diligence in overseeing the management of the organization that they serve. They are required to act in good faith and in the best interest of the organization. Claims or potential claims must be promptly reported.​

​3 Basic Duties

Directors and officers have a duty to exercise due diligence in overseeing the management of the organization that they serve. This involves 3 basic duties:

  1. Duty of Diligence (Duty of Care): Act reasonably, in good faith and in the organization’s best interest.
  2. Duty of Loyalty: Place the interest of the organization before your own.
  3. Duty of Obedience: Act within the scope of applicable bylaws.

Directors and Officers Liability

​Considering Accepting a Directorship? Also Consider Your Liability . . . ​

In addition to basic duties, a director or officer may be held liable for:

  1. Failure to act as stated under a statute.
    For example, if a statute requires directors to file a report or maintain certain records, and these reports or records are not maintained, the director may be liable for an offence under that statute.
  2. Non-compliance of the organization with a statute.
    For example, directors may be liable for financial losses, wrongful dismissal, employee discrimination or failure to remediate environmental damage. Be aware that directors can be held personally liable and that:
    • Ignorance is not a defence.
    • Resignation is not necessarily a defence.
    • Company indemnity may not be enough.

Consult a lawyer for more information on directors’ and officers’ legal liability. For a comprehensive review of legal liability for directors and officers of not-for-profits, review Industry Canada’s Primer for Directors of Not-for-Profit Corporations.

​Managing Liability Risk 

Organizations with paid or volunteer boards should be aware that directors and officers have very specific duties and obligations. Directors and officers should be given all of the appropriate information that is required to perform their duties effectively. 

​Whether your organization is creating its first board or has a long-established board, or whether you’re considering becoming member of a board, learn about 11 risk management opportunities for directors and officers.