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Ontario|Business LawCorporations 226 Directors' and shareholders' liability One of the main benefits of the corporate form of business is that the shareholders, directors and officers of a corporation are not usually held personally responsible for the debts and obligations of the corporation. However, if a shareholder or director has personally guaranteed a loan or debt, he or she will be held personally responsible for it. In addition, there are some situations in which the directors of a corporation can be held personally responsible.
For example, if the corporation has not paid its corporate income tax or the GST and PST on its sales, the directors may and probably will be held personally responsible for paying. Often, directors and officers buy 'directors and officers liability insurance' (D&O) to protect themselves in case this type of situation arises. In comparison, shareholders are not responsible for these debts unless they have personally signed a guarantee.
You should be careful if you have been asked to be a director for a corporation or if you are not involved in the day to day business of the corporation in which you are already a director. It is important to be aware of your legal responsibilities as a director of a corporation. A lawyer can advise you on what your responsibilities are.
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