Directors and De Facto Directors in the Eyes of the CRA

The Lawyers Weekly

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In the March 20, 2015 issue of The Lawyers Weekly, DLA Piper’s Adrienne Woodyard, partner in the firm’s Toronto office, discusses director tax assessments and who the Canada Revenue Agency (CRA) holds liable in the case of failing to submit proper taxes.

Adrienne, who specializes in taxation, states that directors could be held personally liable for a company’s failure to remit various taxes, including GST/HST and employee payroll deductions even long after they resign. In the absence of a director, courts often must consider who else may have acted as a director or de facto director.

In Ontario, ss. 115(4) the Business Corporations Act deems that if a corporation does not have an official director, any person who manages or oversees the affairs of the establishment will be seen as a director. Most often, this is the case when a business is in a state of ruin and corporate record-keeping is less thorough. This is exemplified in the cases of Bekesinski v. Canada [2014] T.C.J. No. 162, and Gariepy v. Canada [2014] T.C.J. No. 193, in which directors had claimed that their resignations from the corporations had occurred before the CRA had assessed the corporations’ taxes. Although these cases ended with atypical results, Adrienne concludes: “[W]hen closely-held corporations are unable to meet their remittance obligations, the post-resignation conduct of former directors will be subject to close scrutiny by the CRA…”

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*This article originally appeared in the March 20th, 2015 issue of The Lawyers Weekly