Directors' Liability
When a limited company goes bankrupt and there is a shortfall to
creditors, the directors in most cases are not liable for any shortfall.
The directors are liable for a shortfall only if they have given personal guarantees
for debt or if laws have been passed specifying that directors will be liable if
there is a shortfall. These statutory creditors are as follows:
- Wages of employees - In accordance with the Employment Standards, a director or
an officer of a corporation is personally liable in an amount not exceeding two
months wages for each employee. Where the corporation is in receivership, bankruptcy
or subject to action under Section 427 of the Bank Act, the director or officer
of a corporation is not personally liable for severance pay.
- Source Deductions - Officers and directors are personally liable for unpaid source
deductions.
- GST - Directors and officers are personally liable for GST owing
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