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Understanding the Roles in Your Corporation
Understanding the Roles in Your Corporation
Jaya avatar
Written by Jaya
Updated over a week ago

When incorporating your business in Canada, it's essential to understand the different roles that individuals must hold: directors, officers, and shareholders. Each role plays a crucial part in the company's structure and operations.

What is a Director?

Directors are responsible for overseeing the overall management and strategic direction of the corporation. They collectively form the Board of Directors, which makes critical decisions and sets company policies. In Canada, a company must have at least one director. Directors must act honestly and in good faith, exercising their powers in the best interests of the company.

Eligibility requirements for directors:

To be eligible as a director, the individual must:

  • Be at least 18 years old

  • Not have been declared mentally incapable by a court in Canada or in another

  • country

  • Be an individual (corporations cannot be directors)

  • Not be bankrupt

Directors bear certain personal liabilities, including:

  • Unpaid employee wages (up to six months under specific conditions if the company cannot pay)

  • Taxes and remittances (such as CPP and EI) owed to the government

  • Involvement in illegal acts or fraud

What is an Officer?

Officers are responsible for actively managing the day-to-day business operations of the corporation. The President is a common officer role, but a company can have various officer positions like CEO, Vice-President, and Treasurer. Officers are appointed by the directors.

It is very common for one person to be both a director and an officer of a corporation.

Eligibility requirements for officers:

  • No specific age requirement, but must be legally capable of fulfilling their duties

  • Must act honestly and in the best interests of the corporation

  • Must avoid conflicts of interest

What is a Shareholder?

Shareholders are individuals or companies that own shares in the corporation, making them partial owners of the business. The number of shares owned determines their ownership percentage and influence in company decisions. Shareholders are legally separate entities from the corporation, which means they typically aren't personally liable for the company's debts.

Eligibility requirements for shareholders:

There are no specific eligibility requirements to become a shareholder, but they must comply with any rules set by the corporation regarding share ownership and transfers.

By understanding the roles and eligibility requirements for directors, officers, and shareholders, you can navigate the incorporation process smoothly and build a strong foundation for your company's success in Canada.

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