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Duties of Corporate Directors in Alberta

Corporate directors owe robust duties to their corporations. The Supreme Court of Canada looked at these duties in the case of Re: BCE, 2008 SCC 69, [2008] 3 SCR 560. The Court said at paragraph 36:

Fiduciary Duty

[36]The directors are responsible for the governance of the corporation. In the performance of this role, the directors are subject to two duties: a fiduciary duty to the corporation under s. 122(1)(a) (the fiduciary duty); and a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances under s. 122(1)(b) (the duty of care)...

The Court went on to say at 37:

The fiduciary duty of the directors to the corporation originated in the common law. It is a duty to act in the best interests of the corporation. Often the interests of shareholders and stakeholders are co-extensive with the interests of the corporation. But if they conflict, the directors’ duty is clear — it is to the corporation....

And at 40:

In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Courts should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule. The “business judgment rule” accords deference to a business decision, so long as it lies within a range of reasonable alternatives: see Maple Leaf Foods Inc. v. Schneider Corp. (1998), 42 O.R. (3d) 177 (C.A.); Kerr v. Danier Leather Inc., [2007] 3 S.C.R. 331, 2007 SCC 44. It reflects the reality that directors, who are mandated under s. 102(1) of the CBCA to manage the corporation’s business and affairs, are often better suited to determine what is in the best interests of the corporation. This applies to decisions on stakeholders’ interests, as much as other directorial decisions.

Duty of Care

The Duty of care of directors and officers is set out in the Alberta Business Corporations Act as well as the Canada Business Corporations Act. The Alberta version says at section 122:

122(1) Every director and officer of a corporation in exercising the director’s or officer’s powers and discharging the director’s or officer’s duties shall

(a) act honestly and in good faith with a view to the best interests of the corporation,

and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(2) Every director and officer of a corporation shall comply with this Act, the regulations, articles, bylaws and any unanimous shareholder agreement.

(3) Subject to section 146(7), no provision in a contract, the articles, the bylaws or a resolution relieves a director or officer from the duty to act in accordance with this Act or the regulations or relieves the director or officer from liability for a breach of that duty.

(4) In determining whether a particular transaction or course of action is in the best interests of the corporation, a director, if the director is elected or appointed by the holders of a class or series of shares or by employees or creditors or a class of employees or creditors, may give special, but not exclusive, consideration to the interests of those who elected or appointed the director.

If you would like legal advice regarding your duties as a corporate director, please feel free to contact us

The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.

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