Are Directors Paid?

Generally, unless there is a provision to the contrary in the corporation's Articles of Incorporation, By-Laws or a unanimous shareholders' agreement, the directors are entitled to fix their own remuneration. Directors cannot abuse this privilege by awarding themselves an excessive remuneration which is disproportionate with the services rendered; otherwise, the courts may intervene upon the petition of an interested party.

Directors' remuneration can take one of several forms, including a fixed annual sum, a fixed amount for attending each meeting of the board of directors, or a specific number of shares in the corporation. A director can, in addition to being a director, act as an employee of the corporation and be remunerated for this function as well. In many small corporations, for example, a person is a director as well as an officer and employee of the corporation and, as such, can be remunerated for each job function he/she performs.

A corporation may be responsible for the defence of its director who is prosecuted by a third party for an act done in the exercise of his/her duties. The corporation may have to pay any damages resulting from that act unless the director committed a grievous offence or a personal offence, separate from his/her duties as director.

If the proceeding against a director is of a penal or criminal nature, the corporation is generally only responsible to pay the director's expenses if he/she had reasonable grounds to believe that his/her conduct was in accordance with the law or if he/she has been freed or acquitted of the charges.

In the case where a corporation pursues one of its own directors for an act done in the exercise of his/her duties, the corporation will typically only assume the director's expenses if the corporation loses its case and the court so decides. If the corporation only wins its case in part, the court may decide the amount of expenses that the corporation must pay.

A corporation can purchase insurance to benefit directors against any liability incurred by them for failing to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

To learn more or to perform some compliance check out our site: https://www.corpcentre.ca/compliance-centre/