Directors of a Canadian Company

Updated on Tuesday 02nd July 2019

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The requirements related to starting a business in Canada are provided by the Company Law. Once the type of structure to be used is established, the shareholders must also decide who the company managers or directors will be before starting the incorporation procedure.

There are several requirements which must be met with respect to appointing company directors in Canada. Our company formation agents in Canada explain these requirements. We can also help foreign investors register a company in Canada and comply with the provisions related to the company management after the business is duly registered.
 

Company management requirements in Canada


The Canadian legislation is imposed at a federal and regional level which means that a company must comply with the provisions of the Company Law when appointing company directors, but also with local regulations with respect to the number of directors and their residency.

The following requisites must be respected when it comes to nominating the directors of a company in Canada:
 
  1. a company must have at least one director who is at least 18 years old at the time of the appointment;
  2. only natural persons can occupy the function of the company director, as legal entities are not allowed;
  3. the person taking on the role of a company director must have a clean criminal record and must be of good morality;
  4. persons who have undergone personal bankruptcy cannot be appointed as company directors in Canada;
  5. at least 25% of the company directors must be Canadian residents, where the company has at least 4 directors;
  6. where a company has fewer directors, at least one of them must be Canadian resident;
  7. the directors of a Canadian company are also entitled to own shares in the business they manage.

It is important to note that public companies in Canada are required to have at least 3 directors, compared to the corporation which can have one director.

Our local advisors can offer more information on the requirements related to appointing company directors in Canada.
 

Duties of company directors in Canada


The shareholders in the Canadian company has the task of appointing company directors in accordance with the law prior to the company registration procedure in Canada. This is because their names must be written in the documents filed with the Trade Register and the company’s Articles of Association.

Company directors have 6 main important duties to fulfill in a Canadian business:
 
  • the duty to manage and oversee the execution of tasks in the business under the provisions of the Corporations Act;
  • the fiduciary duty or the duty of loyalty towards the company and its shareholders, meaning acting in the best interest of the business;
  • the duty or care which implies acting in good faith, with diligence and prudence, as reasonably expected;
  • the duty of exercising a business judgment, which according to the Supreme Court of Canada, implies a decision should be based on various business alternatives;
  • the duty of avoiding conflicts of interest related to contracts signed by the company or their fiduciary duties;
  • the duty of not exercising oppression against other officers or employees in the company.
 
It should be noted that company directors can be appointed for a maximum period of 3 years. The duration of a company director’s mandate is usually set in the Canadian business’ bylaws. Also, if no duration of the mandate is established, the director will keep the function until the next meeting of the shareholders.

In order to be appointed as a director, an individual must consent in writing on taking on the role, according to the law. The person must consent to his/her election within 10 days from the nomination.

Should you have any questions related to the appointment or duties of company directors, our company registration representatives in Canada can answer them.
 

Why invest in Canada?


Canada is a very open country towards foreign investors, as non-residents can easily register businesses here. Nevertheless, they must respect the requirements related to company directors in Canada.

The Canadian economy:
 
  • ended 2018 on a good note with a 2.1% economic growth;
  • compared to 2017, Canadian exports rose by 2% in 2018;
  • Canadian companies created more than 200,000 new jobs in 2018, most of them being full-time jobs;
  • in 2019, Canada is expected to have an economic growth of approximately 2%, just like in 2018.

If you are interested in starting a business in Canada and need information on the election of company directors, please contact our local company registration agents. We can also assist with the business registration procedure.