Directors’ Duties and Liability in Alberta Explained | Libra Law
Many business owners assume incorporation automatically protects them from personal liability.
While incorporation does create a separate legal entity, directors are not immune from responsibility. Alberta law imposes specific duties and obligations on directors, and failing to meet them can result in personal financial exposure.
The corporate team at Libra Law regularly advises directors and shareholders on risk management, governance, and compliance. Understanding your responsibilities early can help you avoid costly disputes and unexpected liability.
What Are Directors’ Duties in Alberta?
Directors of Alberta corporations owe both fiduciary and statutory duties.
At a basic level, directors must:
- act honestly and in good faith
- act in the best interests of the corporation
- exercise reasonable care and diligence
- avoid conflicts of interest
This means decisions must prioritize the company’s interests, not personal benefit or convenience.
Even well-intentioned mistakes can create liability if proper care is not taken.
The Duty of Care and the Duty of Loyalty
Two core legal duties guide most director conduct.
The duty of care requires directors to act prudently and make informed decisions. This includes reviewing financial information, asking questions, and understanding risks before approving major actions.
The duty of loyalty requires directors to act in the corporation’s best interests, not their own. Self-dealing, undisclosed conflicts, or personal gain at the company’s expense can lead to serious consequences.
Directors who ignore these duties may face claims from shareholders, creditors, or regulators.
When Directors Can Be Personally Liable
Although corporations generally shield owners from personal liability, several exceptions apply.
Directors may be personally liable for:
- unpaid employee wages
- certain taxes and remittances
- occupational health and safety violations
- environmental obligations
- breaches of fiduciary duty
- improper or reckless decisions
In some cases, creditors or employees can pursue directors directly.
Employment-related claims are particularly common. Directors should understand how termination and severance obligations can affect exposure. More information is available through employment law services in Alberta.
Employment and Wage Liability Risks
Under Alberta law, directors can be personally responsible for unpaid wages or vacation pay owed to employees.
If a company cannot meet payroll or shuts down without paying staff, employees may seek recovery from directors.
This risk increases during financial distress, restructuring, or business closures.
Understanding termination obligations is critical. You can learn more about potential costs in severance packages in Alberta.
Financial and Tax Obligations
Directors may also be liable for certain government remittances, including payroll deductions and taxes.
Failing to remit required amounts can result in personal assessments, penalties, and interest.
Signing corporate documents without understanding the company’s financial position can increase risk. Directors should ensure proper accounting and compliance systems are in place.
The Importance of Proper Corporate Governance
Good governance practices significantly reduce personal liability exposure.
Directors should:
- hold regular meetings
- document decisions
- keep accurate records
- review financial statements
- obtain professional advice when needed
Maintaining proper records is especially important. Incomplete documentation can weaken your defense if a dispute arises. Learn more about this in the importance of corporate records in Alberta.
Risk Management During Business Transactions
Liability risks often increase during major changes such as acquisitions, restructurings, or dissolutions.
Directors should carefully assess:
- employee obligations
- outstanding debts
- regulatory compliance
- contract commitments
Legal review before completing transactions helps avoid inheriting hidden problems. Support for these matters is available through business law services in Alberta.
How Directors Can Protect Themselves
While risk cannot be eliminated entirely, directors can take practical steps to protect themselves.
These include:
- staying informed about company operations
- documenting decisions and advice received
- declaring conflicts of interest
- obtaining appropriate insurance
- seeking legal guidance before major decisions
Proactive planning is almost always less expensive than defending litigation later.
Getting Advice Before Problems Arise
Serving as a director carries both opportunity and responsibility. Understanding your duties helps you make confident decisions while protecting your personal assets.
If you are unsure about your obligations or facing a governance issue, you can reach out through the contact page to speak with a lawyer.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified professional.
