Directors And Officers Liability
Your D&O Liability Legal Advocates: Achkar Law
The separation between a company, its management, and its shareholders is commonly referred to as the “corporate veil”. It allows the courts to attribute a corporation’s actions to the corporation itself, and not the individuals who necessarily must act on behalf of the corporation. In limited circumstances, courts look beyond a corporation’s separate legal identity and assign personal liability to individual decision-makers for actions taken by the corporation. This is the piercing of the corporate veil in corporate and commercial litigation. Piercing the corporate veil is an invaluable tool to seek remedies that would otherwise be unavailable against the corporation itself. Whether you want to pursue piercing the corporate veil or defend against it, a corporate lawyer at Achkar Law can help maximize the chances of success.
A Corporation’s Directors, Officers, or Shareholders Can Be Held Personally Liable
A corporation is considered a distinct and independent legal entity separate from its owners, directors, officers, or shareholders. This concept is also often referred to as the “corporate veil.”
However, in certain circumstances, courts look beyond a corporation’s separate legal identity and assign personal liability to individual decision-makers for actions taken by the corporation. This includes directors, officers, and shareholders. This is known as the “piercing of the corporate veil” in corporate and commercial litigation. Piercing the corporate veil is an invaluable tool to seek remedies that would otherwise be unavailable against the corporation itself.
In corporate and commercial litigation, the courts will typically pierce the corporate veil when the company is found or suspected to be “incorporated for an illegal, fraudulent or improper purpose and is a mere façade concealing the true facts.”
Piercing the corporate veil in commercial litigation is quite easy when there is a single director, officer, and/or shareholder acting as the “controlling mind.”
When Are Directors and Officers Personally Liable?
Directors manage and control the operations of companies subject to the law, its corporate articles, and its by-laws. In most cases, a company’s directors act on its behalf and the directors’ actions are legally those of the company.
If the directors fail to perform their duties and meet their personal obligations. The courts may pierce the corporate veil and hold the company’s directors personally liable and go after their personal assets.
Other reasons for piercing the corporate veil include:
- Breach of statutory duties owed by a director;
- Fraud and misrepresentation;
- Violation of criminal and quasi-criminal acts;
- Misappropriation of corporate funds;
- Serious tortious conduct attributable personally to the directors, such as breach of contract or intentional infliction of mental distress;
- Oppression under provincial or federal corporate statutes; and
- Other wrongful conduct engaged in by a director with substantial and majority control over the corporation.
The courts have frequently held piercing the corporate veil and holding directors, officers, and/or shareholders personally liable are appropriate, including for the following reasons:
- when the company’s incorporation is for an illegal, fraudulent, or improper purpose;
- where those in control of the corporation have expressly directed a wrongful act to be done; and
- where the company is completely dominated and controlled and is used as a shield for fraudulent or improper conduct.
While litigating a corporate or commercial dispute, the plaintiff must draft their claim properly to prove all the elements required to pierce the corporate veil. If a plaintiff fails to properly plead material facts in their case, the court may deny them the right to move forward with their claim.
That said, the Courts sometimes dismiss claims where not enough has been pled to justify piercing the corporate veil. This includes vague and unsupported claims improperly pled in Statements of Claim by certain Plaintiffs.
Achkar Law Can Assist in Directors and Officers Liability Cases
Achkar Law, as a corporate and commercial law firm, can provide valuable assistance in directors and officers (D&O) liability cases by offering legal support, guidance, and representation to corporations or individuals serving as directors and officers of corporations.
- Legal Counsel and Advice
- Risk Assessment
- Litigation Solutions
- Corporate Governance Support
- Documentation and Record-Keeping
Contact Achkar Law
Whether you’re a corporation safeguarding its leadership or an individual director or officer seeking unwavering legal support, Achkar Law is here to protect your interests. Our seasoned corporate legal team focuses in navigating the complexities of D&O liability matters in Ontario.
Don’t face the challenges alone; take action today. Secure your future, reputation, and assets with Achkar Law by your side.
Contact us now for a confidential consultation and let us be your steadfast advocates in the world of corporate governance and liability.