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Legal Guide

Senior officers have the same fiduciary relationship to the corporation as the corporation’s directors.
The minimum standard of care applies equally to directors and officers. As such, much of what is discussed in the context of director liability applies equally to officer liability. However, since most of an officer’s powers and responsibilities are derived from delegation by the board, the corporate statutes impose far fewer specific liabilities on officers. Many of the statutory liabilities of a director, such as under environmental and tax legislation, apply to officers as well. Similar special obligations also exist for officers in public companies.

It is sometimes difficult to determine whether a particular employee is an officer in the legal sense.
This determination is, generally, linked not to an individual’s job title but to his or her role in the company. Employees who occupy positions involving the power and ability to direct and guide the affairs of the corporation may be considered officers and face the same liability.

Shareholder, stakeholder and regulatory remedies

There are a variety of options for shareholders and stakeholders who want to bring an action against directors and officers of a corporation pursuant to corporate law. The most important of these options are:

  1. i.     The oppression remedy, for parties who believe that management or the board have acted in a manner which was oppressive and prejudicial to their interests;
  1. ii.     A derivative action, for parties seeking redress on behalf of the corporation for a breach of the corporation’s rights; or
  1. iii.     Compliance orders, for parties seeking to compel a certain action of the corporation or its directors or officers, or seeking to restrain a breach of a duty owed to the corporation.
Orders made as a result of successful actions can include forcing a director or officer to give up any benefit gained in the course of wrongful conduct and appointing directors in place of the directors then in office.

Directors can also be held liable to third parties for actions taken in their directorial capacity by way of common law actions. In certain cases, courts have held directors personally liable for: (a) a breach of trust by the corporation where they had full knowledge of a breach of trust by the corporate trustee; and (b) their own tortious conduct, even though they pursued the conduct on behalf of the corporation.

In addition, regulators can take action when directors or officers or the corporation fail to meet the standards of corporate governance set out by a variety of regulatory agencies. Many of these agencies have the power to take action against officers and directors directly, including fines and imprisonment under the legislation noted under the “Specific statutory duties” section above. 

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