Under the Ontario Business Corporations Act (the OBCA) a director’s resignation is only effective at the later of when the resignation is received by the corporation or the effective date, while under the Canada Business Corporations Act a director’s resignation is only effective at the later of when the resignation is sent by the director or the effective date. In either case, it is clear that the corporation is entitled to proper notice of a resignation by a director.
In a recent decision of the Federal Court of Appeal, the court found that an intention to resign did not satisfy the necessary preconditions of an effective resignation under the OBCA. In this case, the corporation’s lawyer was instructed to prepare the resignations of two directors, as demonstrated by the unsigned resignation documents found in the lawyer’s file. The directors failed to execute and deliver the resignations, however, and as a result they were found to be personally liable as directors for the corporation’s unremitted payroll tax withholdings.
This decision is a good reminder of the perils of neglecting the formalities of corporate record keeping. When tendering a resignation, it is best practice for the director to deliver his or her resignation to the corporation in writing via registered mail or courier, and insert the resignation into the corporate minute book. As well, it is wise to promptly file a Notice of Change form to ensure the public record is accurately updated.