De Facto Director: Personal Liability

Posted on June 10th, 2025 in Domestic Tax

Empty boardroom. White table, black chairs, and a tv on the wall. One wall of the boardroom is made of glass.

A director of a corporation, non-profit organization, or other entity can be personally liable for payroll source deductions and GST/HST that the entity fails to remit to CRA, unless the director exercised due diligence to prevent failure to remit these amounts on a timely basis. An individual can be held personally liable for up to two years after they resign as a director.

A November 29, 2024, French Quebec Court of Appeal case considered whether the taxpayer was a de facto director of a corporation and therefore liable for unremitted QST and source deductions for 2012 and 2013.

Taxpayer loses

Although the taxpayer had formally resigned as a director in 2010, the taxpayer continued to act as a director. Therefore, the Court ruled he was a de facto director and liable for the corporation’s debts. This determination was based on the fact that the taxpayer remained involved in banking, contract negotiations, discussions with Revenu Québec, and other corporate decisions after he resigned.

If you resign as a director, ensure to cease acting as a director.

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