New Ministry of Finance (BC) Director’s Liability Bulletin

The Ministry of Finance (BC) released a director’s liability tax bulletin that outlines the government’s position regarding director’s liability and the circumstances in which taxpayers may be held personally liable for a director’s failure to remit tax (the “Director’s Liability Bulletin”).

The Director’s Liability Bulletin includes the following passage related to deemed directors or de facto directors.

If a person who is not a director acts as if they are a director, the ministry may deem that person a director for the purposes of director’s liability. Director’s liability applies to such a person as if they were a director of record.

The ministry may consider a person to be a director if that person:

1. purports to have the authority of a director,
2. under their own authority, undertakes major actions or transactions for the corporation, or
3. under their own authority, directs the business and affairs of the corporation.

However, a person will not be deemed a director because of actions they take:

1. under the direction of a shareholder, director or officer of the corporation,
2. as a lawyer, accountant or other professional acting solely in their professional capacity, as a trustee in bankruptcy, or
3. as a receiver or secured creditor controlling its interests in the property of the corporation.

If the ministry believes that a person acted as a director, it will request additional information. If the ministry then decides that the person acted as a director, it will notify the person of its decision.

We recommend director taxpayers (or taxpayers that may be deemed to be defacto directors) to retain a tax lawyer with experience in director’s liability tax disputes to respond to any government requests for additional information and/or to prepare appropriate legal submissions.

Although the Director’s Liability Bulletin provides a limited explanation of the law surrounding director’s liability, we believe that knowing and understanding the government’s public position is valuable first step.