Articles & Resources

1) What is a Director?

A director is an individual who manages and oversees the running of the business of the corporation and makes certain important decisions. A director sits on the board of directors with the other directors of the corporation, if any.

2) How Many Directors Must a Corporation Have?

Every corporation must have at least one (1) director. There is no fixed.

3) Who is Eligible to become a Director?

Only physical persons (i.e., individuals) are NOT eligible to be directors of a corporation if they fit the criteria below:

  • persons under 18 years of age;
  • persons over 18 years of age who are under tutorship or guardianship or are otherwise incapacitated; and
  • persons of unsound mind.

A director is NOT required to be a shareholder of the corporation.

For corporations incorporated federally or in Ontario, at least 25 percent of the directors must be resident Canadians.

Where a corporation has fewer than four directors, then at least one director must be a resident Canadian.

4) How Do People Become Directors?

A corporation’s first directors are generally those named on the initial filing given to Ministry of Government Services along with the corporation’s Articles of Incorporation.

These persons officially become the directors of the corporation as of the date mentioned on the corporation’s Articles of Incorporation and they remain in office until they are re-elected, replaced, removed or resign.

Subsequent directors are elected by the shareholders on an annual basis where the shareholders either re-elect the present directors for another term or elect new directors.

Directors can usually be re-elected for an indefinite period of time.

The election of directors can occur at any given time during the year, but in practice, the election almost always takes place during the annual shareholders’ meeting.

5) What happens when a Director quits?

Any vacancy in the board of directors is filled for the remainder of the term by the other directors.

6) How are Directors Removed from the Board of Directors?

Shareholders have the exclusive right to remove a director.

The director being removed can attend the shareholders meeting and be heard or give reasons for his/her opposition to his/her removal in a written statement read by the chairman of the meeting. The vacancy created by the removal of a director can be filled at the meeting at which the removal took place or at a later date.

7) Can a Director Resign?

A director can resign at any time as a director by giving notice to that effect. A director’s resignation can be oral (during a board of directors’ meeting), but it is recommended that a director’s resignation to be in written form for proof.

8) How does a Director Vote?

Directors have only one vote per person at board of directors’ meetings.

Sometimes the chairman of the board of directors has a tie-breaking vote.

Shareholders on the other hand whose number of votes is based on the number and class of shares that they hold at a given time.

9) Are Directors Paid?

The directors are entitled to set their own pay in the form of a fixed annual sum, a fixed amount for attending each meeting, or a shares in the corporation.

Directors cannot abuse this privilege by awarding themselves an excessive remuneration which is disproportionate with the services rendered.

10) What Power does a Director Have?

Directors are responsible for administering the business of the corporation, and they make decisions such as:

  • declaring and paying dividends;
  • the remuneration of directors;
  • the appointment of officers;
  • approve financial statements.