UNDERSTANDING THE DUTIES & OBLIGATIONS OF DIRECTORS OF NOT-FOR-PROFIT CORPORATIONS

As a Director of a not-for-profit Corporation, you can make a valuable contribution to the work of the organization, to its members, and, most important, to the community which it serves.

In order to properly carry out your duties as a Director, you should be aware of your rights, obligations, liabilities and right to indemnification.

1. A Director is a fiduciary. That means that a Director must act in good faith, with a view to the best interests of the Corporation as a whole. You may be held to a higher standard if you are on the Board of a charity. Generally speaking, directors of charitable corporations should meet the standard of care expected of someone in charge of property that is subject to a trust.
2. Directors are to manage or supervise the management of the activities and affairs of the corporation. This does not mean that you can interfere with staff or attempt to micromanage the Corporation’s activities. The Corporation hires competent staff, and as a Director you can rely on the information provided by staff and the experts retained.
3. The Director must be qualified; that is, 18 years of age or older, mentally competent and not bankrupt. A Director need not be a Member of the Corporation.
4. A Director cannot appoint a proxy to attend meetings. The Director is personally responsible and cannot delegate this responsibility to others.
5. Directors must exercise the care, diligence and skill that a reasonable person would exercise in the same circumstances. However, if you are an expert on, for example, law, finance, accounting or investing, you will be held to a higher standard than a non-expert Board Member.
6. As part of your duty to act with diligence, you should know the key principles of the Articles, By-laws, Regulations and law (such as the Canada Not-for-Profit Corporations Act) that govern the operations of the Corporation. Ask for an orientation or training session about your role and the principal regulatory or financial issues when you join a Board of Directors.
7. The Corporation must be transparent and accessible to its members, but where a matter is identified by the Board as confidential, Board Members must keep the matter confidential and not disclose it to anyone other than a fellow Board Member.
8. You cannot take advantage of your position. If you believe you have a conflict, you must declare it and not participate in any discussion or decision on the matter.
9. As a Director of a not-for-profit corporation, you are not permitted to receive fees or payment for your services. You are entitled to be reimbursed for your out-of-pocket expenses.
10. There are areas where you may be personally liable for the Corporation’s business. For example, if the Corporation does not have enough assets to pay six months’ of unpaid wages to employees, Directors will be responsible for the shortfall. (This means you should keep careful track of the finances.) You may also be responsible if the Corporation fails to make tax deductions, HST payments or if the Corporation breaches environmental standards.
11. Directors may be indemnified by the Corporation out of its assets for any obligation which they incur in the course of their duties. Many corporations obtain director and officer liability insurance as a further protection to directors.
12. Subject to the Articles and By-laws, a Director may be removed by an ordinary resolution at a meeting of the Members.
13. A Director must be prepared to resign. If the Corporation or the Board appears to be following an improper course of action, acting in an inappropriate manner or is contemplating illegal or inappropriate activities, you should raise the matter with your fellow Board Members and, if necessary, get legal advice about your position and legal options. If remedial action is not taken, you should consider resigning. You should give notice of your resignation to the Corporation, and to any regulator that keeps a public record of directors.

This is not an exhaustive list.  Please refer to the Canada Not-for-Profit Corporations Act, the Corporation’s legal advisors or your own advisor about any specific issue you might have regarding your role.