COVID-19 has had and will continue to have impacts on virtually every corporation in Canada and globally. Such a disrupting chain of events, combined with freshly enacted changes to corporate legislation for federally incorporated corporations, may raise questions on the scope of directors’ fiduciary duty. If the recent legislative amendments have provided certain clarifications on a director’s fiduciary duty towards the corporation, they have had limited opportunities to be tested. The public health crisis may set the stage for such a test.

As discussed below, in discharging their fiduciary duty, directors will need to consider different factors. To benefit from the protection of the business judgement rule doctrine, directors should formulate and follow a sound protocol.

Fiduciary duty in context

Under the Canada Business Corporations Act (the CBCA), directors of a corporation have a “fiduciary duty” towards the corporation according to which they must “act honestly and in good faith with a view to the best interests of the corporation.” [1] In cases of alleged breach of such duty, courts apply the “business judgement rule,” which commands great deference to directors, to the extent directors followed a reasonable process in decision-making.

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