Every corporation must have at least one director.
Directors are elected by the shareholders of the corporation, and they are the individuals ultimately responsible for overseeing the business and affairs of the corporation. Directors are also responsible for appointing officers (such as the CEO).
Fiduciary Duty
Directors owe a fiduciary duty to the corporation. This means that directors must, in exercising their powers and discharging their duties, act honestly and in good faith with a view to the best interests of the corporation. This duty is owed to the corporation itself and not to the shareholders, regardless of whether the director is also a member of management (an officer) or is a shareholder.
In practical terms, it means that a director must not personally take advantage of business opportunities that otherwise belongs to the corporation. Directors must disclose any conflicts of interest and act accordingly (e.g., refrain from voting) and must keep information about the corporation confidential.
Standard of Care
Directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. This means that each director must devote reasonable time and attention to the affairs of the company; and take appropriate steps to make informed decisions.
Personal Liability
While shareholders generally have limited liability, directors can have personal liability in certain instances such as unpaid wages to employees, unpaid taxes and environmental damage.
Directors might also face personal liability for approving the issuance of securities for consideration that is less than fair value, paying dividends when the corporation is insolvent, or voting to approve of a transaction if they have a conflict of interest and did not disclose this conflict.
Other Duties
At the end of each financial year, directors must meet and pass certain “annual resolutions” to, among other things, appoint officers for the upcoming year and approve the corporation’s financial statements.
When you incorporate your business with SkyLaunch, our online incorporation tool will include all the necessary documentation and approvals to get you set up initially as the sole shareholder, director and officer of your corporation. With SkyLaunch's Complete Compliance Package, we can also help you with your company's annual directors' and shareholders' resolutions so you don't have to worry.
Read about what it means to be a shareholder here.
