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Directors Liability

Benaroch c. La Reine 2015 CCI 91 (Favreau)  — CRA must prove corporation’s failure to pay before pursuing its directors – r 138 motion

This was a non-arm’s length transfer case involving GST.  The appellant’s spouse transferred to him part of the value of a jointly owned home.  She owed money for a directors’ liability assessment. The appellant challenged his wife’s liability.  At the hearing, the Crown failed to include evidence proving that the corporation’s debt was unsatisfied when the wife was assessed. (This is an application of the… Read More »Benaroch c. La Reine 2015 CCI 91 (Favreau)  — CRA must prove corporation’s failure to pay before pursuing its directors – r 138 motion

Maxwell v. The Queen 2015 TCC 74 (D’Arcy) — Director is only liable for corporation’s tax debts up to amount shown in Federal Court certificate 

The Federal Court certificates which CRA filed against the corporate tax debtors was less than the amounts assessed against the director. So Justice D’Arcy reduced the director’s liability down to the amounts shown in the certificates.  Justice D’Arcy relied on the wording of the directors’ liability rules which he summarizes:   [10]        [ITA] Section 227.1 places certain limitations on the director’s liability. Two of these… Read More »Maxwell v. The Queen 2015 TCC 74 (D’Arcy) — Director is only liable for corporation’s tax debts up to amount shown in Federal Court certificate 

Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Here is a very interesting argument on s.  160 assessments. Hogan J.  makes this in a footnote in a s.  160 assessment within a corporate context where there was a corresponding s.  15 (1) assessment.    “[FN 2]   The argument is that the benefit under subsection 15(1) of the Act should be reduced by the liability under section 160 of the Act because the appropriation… Read More »Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Jobin c. La Reine, 2014 CCI (Rip CJ) — If you bankrupt your corporation, resign as director to protect yourself from tax liability 

The taxpayer in this case was assessed for his corporation’s payroll remittance failures. He argued that he was protected by the two-year limitation period in ITA s. 227.1(4). He said that when the CRA assessed him in 2010 he had ceased to be a director more than two years earlier when: (a) the corporation made a bankruptcy assignment in February 2003 and the trustee was… Read More »Jobin c. La Reine, 2014 CCI (Rip CJ) — If you bankrupt your corporation, resign as director to protect yourself from tax liability 

MacDonald v. The Queen, 2014 TCC (Rossiter ACJ) — You’re not a director just because you sign some documents that call you one and your name is shown on the public register, if you didn’t agree to be a director

CRA will often rely on the public registry to decide if someone is a director liable for a corporation’s HST or payroll amounts.  “[33]        The public registry of directors could lead to a presumption that one is a director but this presumption may be overcome provided there is evidence the person never consented to be a director. “[34]        The Tax Court of Canada has previously… Read More »MacDonald v. The Queen, 2014 TCC (Rossiter ACJ) — You’re not a director just because you sign some documents that call you one and your name is shown on the public register, if you didn’t agree to be a director

Maddin v. The Queen, 2014 TCC (Bocock) — Director’s liability: You can be liable if you don’t ask an obvious question about the status of source deduction remittances.

Mr. Maddin was a shareholder, officer and director of Quadra Marble and Granite Inc. (“Marble”).  His family corporation was Marble’s landlord.  Another family corporation sold its business to Marble.  Mr. Maddin was at Marble’s office 2-3 days a week.  His long-time bookkeeper was Marble’s bookkeeper.  By early 2008, he knew Marble was slow paying its rent to his corporation and there were other signs of financial… Read More »Maddin v. The Queen, 2014 TCC (Bocock) — Director’s liability: You can be liable if you don’t ask an obvious question about the status of source deduction remittances.

Gariepy v. The Queen, 2014 TCC (Boyle) — an unsigned director’s resignation can start the 2-year limit on liability

NOTE: THIS DECISION WAS OVERTURNED BY THE FCA: Canada v. Chriss 2016 FCA 236.   Directors may be liable for a corporation’s failure to remit employee source deductions or GST.  But there is a two-year time limit on these assessments: if the director resigned more than two years before the CRA assesses, the director is not liable.  (See ETA s. 323(5) and ITA s. 227.1(4).)   Here, in defending against a 2008 directors’… Read More »Gariepy v. The Queen, 2014 TCC (Boyle) — an unsigned director’s resignation can start the 2-year limit on liability

Qian v. The Queen, (2013 TCC Favreau) — Forced to act as a director for a company you don’t control, to save your job, you could be liable for payroll taxes

You’re a bookkeeper.  Under threat of losing your job, you agree to your employer’s demands that you buy a small share interest and act as a director of the company.   You try to prevent what you see as bad management but the real shareholders ignore you. The company fails to make its payroll remittances. CRA goes after you for the unremitted payroll amounts.   Are you liable?… Read More »Qian v. The Queen, (2013 TCC Favreau) — Forced to act as a director for a company you don’t control, to save your job, you could be liable for payroll taxes

McKenzie v. The Queen, 2013 TCC (Hershfield)–in defending yourself from a director’s liability assessment, you needn’t show you were perfect, just that you believed reasonably that the corporation had remitted the taxes it should; (Indian Act exemption)

The judge’s reasons in this case are long — 50 pages — but essentially this was a directors’ liability case and the question was whether the used car auctioneer had delivered the cars to Indians under GST tax-exempt conditions.  Based on CRA policy on GST for car sales to Indians, no GST applied to the sales of cars delivered to a reserve.  The judge found… Read More »McKenzie v. The Queen, 2013 TCC (Hershfield)–in defending yourself from a director’s liability assessment, you needn’t show you were perfect, just that you believed reasonably that the corporation had remitted the taxes it should; (Indian Act exemption)