CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
Importantly, and unlike in certain other jurisdic - tions, neither the duty of care nor the duty of loyalty can be waived, whether in the company’s articles, by contract or otherwise. That said, as further discussed at 5.1 Relationship Between Companies and Shareholders , such duties can be partially or wholly transferred from the offic - ers and directors to the company’s shareholders by the functioning or express terms of a unani - mous shareholders’ agreement governing the company. 4.7 Responsibility/Accountability of Directors Canadian law is clear that directors owe their duties to the company and not to any of its stakeholders, including shareholders. However, the CBCA and a substantively similar ruling by the Supreme Court of Canada (Canada’s highest court) provide that, in pursuing the company’s best interests, directors may take into account, without limitation, (i) the interests of sharehold- ers, employees, retirees and pensioners, credi - tors, consumers and governments, (ii) the envi - ronment, and (iii) the corporation’s long-term interests. Directors and officers in Canada also benefit from the “business judgement rule.” This pro - vides that, so long as the company’s directors and officers act honestly, in good faith, and with a reasonable degree of care and diligence, Cana - dian courts will not second-guess their business decisions, even where those decisions ultimately result in negative consequences for the com - pany. Stated differently, the business judgement rule recognises that directors and officers often face complex and uncertain business situations, and thus should be afforded a degree of discre - tion in making decisions without fear of personal liability, provided they act in pursuit of the cor -
poration’s best interests and within the scope of their authority. 4.8 Consequences and Enforcement of Breach of Directors’ Duties As the duties of care and loyalty are owed by directors and officers to the company, a claim for breach of these duties lies with the company. However, and as further discussed at 5.4 Share- holder Claims , Canadian corporate law allows for derivative actions whereby a shareholder can pursue a claim against the directors or officers on behalf of the company for a breach of duty owed by them to the company. 4.9 Other Bases for Claims/Enforcement Against Directors/Officers As further discussed at 5.4 Shareholder Claims , the actions of directors and officers may give rise to an oppression claim under Canadian corporate law, which is a broad and potentially powerful statutory remedy. That said, Canadian courts have held the fundamental purpose of the oppression remedy is to provide recourse regarding actions taken by the company. As such, the actions of the directors or officers will generally only be oppressive when they are acting in their capacity as directors and offic - ers, and the claim is against the company as opposed to the directors. 4.10 Approvals and Restrictions Concerning Payments to Directors/ Officers The CBCA expressly permits directors to vote on their own remuneration as directors, notwith - standing the conflict of interest. That said, man - agement typically provides significant input into the compensation process, including by consid - ering recent “comparables” and/or by engaging compensation advisers. Canadian securities guidelines recommend that the company’s com -
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