Directors are elected by the shareholders of the corporation through an ordinary resolution at the first meeting of shareholders and at each annual meeting thereafter. Alternatively, they are elected by written resolutions of the shareholders signed by all the shareholders in lieu of such meetings. Vacancies occurring amongst the directors arising due to resignation, death, or other incapacity may be filled by resolution of the shareholders at a meeting or in writing or, if the by-laws, articles of incorporation or any unanimous shareholders’ agreement permits, a resolution of the directors at a meeting or in writing provided that a quorum of directors remains in office.
Non-publicly traded companies are required by the CBCA to have a minimum of one director. The CBCA does not set a cap on the maximum number of directors in a corporation. The Articles may provide that the board is a fixed number of directors or may provide for a minimum and maximum number of directors. If the Articles
provide for a minimum and maximum number of directors, the actual number of directors to be elected each year is deemed to be the number of directors elected at the last annual meeting. If no range is provided in the Articles, the fixed number of directors can only be changed by filing an amendment to a corporation’s articles.
There are no specific requirements for professional training, education or experience to be a director. However, in order to be a director you must: – be at least 18 years of age
Further, at least 25% of the corporation’s directors must be resident Canadians. If the corporation has less than four directors, at least one director must be a resident Canadian.
As a director, you have a general power and duty under the CBCA to supervise the management of the business and affairs of the corporation. This includes the power to borrow money on behalf of the corporation, to enter into contracts that bind the corporation, to hire executives and other personnel, and to issue debt obligations of the corporation in accordance with the corporations’ bylaws and Articles. However, the powers of directors may be subject to restrictions included in the corporation’s articles or bylaws, or any unanimous shareholder agreement that may be in place. A unanimous shareholders’ agreement restrict some or all of the powers of the directors and transfer them to the shareholders.
Corporate directors exercise their powers by resolution, and therefore act as a collective, except where any one director has been granted specific authority to act on behalf of the corporation.
Subject to a corporation’s bylaws and any unanimous shareholders’ agreement, the shareholders or directors may, by resolution, designate any specific officers and/or directors who are authorized to sign instruments on behalf of a corporation. As such, any one director or officer alone may execute instruments to bind the Corporation.
Under general common law principles, directors have a duty to avoid conflicts of interest given their fiduciary duty (explained below) to the corporation. Further, as a director, you are required under the CBCA to disclose the nature and extent of any interest you have in a material contract or transaction with the corporation.
Some examples of situations where a conflict of interest may arise include:
Any interest in a material contract or transaction must be approved by the board in a vote that you do not participate in. The material contract or transaction must also be reasonable and fair to the corporation, otherwise you may be required to account to the corporation or to its shareholders for profits realised from the transaction and/or the court may on application set the transaction aside.
If, in good faith, you fail to disclose or refrain from voting, it is still possible for the shareholders to retroactively ratify the material contract or transaction by way of a special resolution. In such a case you will not be held accountable to the corporation for any profits realized from your interest in the material contract or transaction.