Directors of charities and associations are all concerned about personal liability. It is a common theme which comes up regularly. In most cases they are volunteers giving their time and expertise to the organization with no financial upside. They do not want, nor deserve, any personal financial risk. In most cases, they are subject to a “subjective standard” which means that those people who have expertise in a certain area have a higher standard than others on the board, e.g., an accountant serving on the board has a higher standard of care than a teacher when financial matters are being discussed. This may change with proposed federal and Ontario legislation, but until that legislation is passed this still is the law.

The majority of successful cases against directors relate to tax matters. This includes income tax deducted at source and GST collected and not remitted. In these cases the government is the plaintiff. The government has the money and the patience to proceed against the directors.


A director of a soccer club who was also a chartered accountant, was held personally liable for unremitted source deductions of close to $50,000. The federal Court of Appeal noted that this person, although he had not been formally appointed as a director, had in fact functioned as a director and was held liable. He had played a significant role in the affairs of the sports organization. He was aware that the club had failed to remit the correct amount of source deductions and he did nothing to prevent that. The court held him personally liable.


A semi-retired director of a New Brunswick business left the day-to-day operations to a senior employee. When he signed the company’s financial statements he did not review them. The government audited this company and noted that not all GST had been remitted as required. It was discovered that the trusted employee had been misappropriating funds for years. He was charged and found guilty.

The court had to consider whether the director had exercised a degree of care, diligence and skill required for a reasonably prudent person. Directors who are involved in the day-to-day management of a business have more difficulty establishing the due diligence defence than those who are not involved, such as is the case here. The court noted that the director was not sufficiently involved on a day-to-day basis to have any reason to doubt the reliability and honesty of the key employee.

The court noted that since the director had no reason to suspect that the GST payments were inaccurate, it was not reasonable to expect him to know of the failure to remit the GST remittances and therefore he was not liable for them.


The directors of an association, charity, community group, etc. should insist that senior management assure them that all taxes collected, owing or deducted at source are properly deducted and forwarded to the government as required. If there are no employees then the Chair of the board or President should ensure that this takes place.

Many well run organizations have the CEO or CFO prepare a regular (at least annual) certificate confirming that all deductions at source have been made, that all GST and other taxes collected have been remitted, that all tax returns have been filed and that all taxes payable have been paid.

Directors, particularly those with an accounting or finance background and experience, should review the financial statements and talk to the organization’s accountant to determine whether there is any reason to be suspicious about the amounts owing to the government.

Many organizations have directors’ and officers’ liability insurance. Policies should be reviewed to insure that they cover this situation.

Organizations which are “close to the line” financially should take steps to set up a reserve to cover those circumstances. If they do not, they should very carefully ensure that all taxes owing are paid.