Canada Business Corporations Act (R.S.C., 1985, c. C-44)

Marginal note:Directors’ liability

• 118 (1) Directors of a corporation who vote for or consent to a resolution authorizing the issue of a share under section 25 for a consideration other than money are jointly and severally, or solidarily, liable to the corporation to make good any amount by which the consideration received is less than the fair equivalent of the money that the corporation would have received if the share had been issued for money on the date of the resolution.

• Marginal note:Further directors’ liabilities

  (2) Directors of a corporation who vote for or consent to a resolution authorizing any of the following are jointly and severally, or solidarily, liable to restore to the corporation any amounts so distributed or paid and not otherwise recovered by the corporation:

  • (a) a purchase, redemption or other acquisition of shares contrary to section 34, 35 or 36;

  • (b) a commission contrary to section 41;

  • (c) a payment of a dividend contrary to section 42;

  • (d) a payment of an indemnity contrary to section 124; or

  • (e) a payment to a shareholder contrary to section 190 or 241.

• Marginal note:Contribution

  (3) A director who has satisfied a judgment rendered under this section is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.

• Marginal note:Recovery

  (4) A director liable under subsection (2) is entitled to apply to a court for an order compelling a shareholder or other recipient to pay or deliver to the director any money or property that was paid or distributed to the shareholder or other recipient contrary to section 34, 35, 36, 41, 42, 124, 190 or 241.

• Marginal note:Order of court

  (5) In connection with an application under subsection (4) a court may, if it is satisfied that it is equitable to do so,

  • (a) order a shareholder or other recipient to pay or deliver to a director any money or property that was paid or distributed to the shareholder or other recipient contrary to section 34, 35, 36, 41, 42, 124, 190 or 241;

  • (b) order a corporation to return or issue shares to a person from whom the corporation has purchased, redeemed or otherwise acquired shares; or

  • (c) make any further order it thinks fit.

• Marginal note:No liability

  (6) A director who proves that the director did not know and could not reasonably have known that the share was issued for a consideration less than the fair equivalent of the money that the corporation would have received if the share had been issued for money is not liable under subsection (1).

• Marginal note:Limitation

  (7) An action to enforce a liability imposed by this section may not be commenced after two years from the date of the resolution authorizing the action complained of.