16 June 1993 Income Tax Severed Letter 9313795 - Directors—Residence

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                                  5-931379
XXXXXXXXXX                                        D.A. Palamar
                                                  (613) 957-2094

Attention: XXXXXXXXXX

June 16, 1993

Dear Sir:

Re: Review of Canada Business Corporations Act("CBCA")

We are replying to your letter of May 10, 1993 in which you advised that, as part of a review of corporate legislation, you would be interested in our views with respect to the requirement in Section 105 of the CBCA that a majority of the directors of a corporation be resident Canadians.

There are a number of provisions of the Income Tax Act ("the Act") which hold a Director liable for acts or obligations of a corporation. For example, section 227.1 renders a director jointly and severally liable with a corporation to pay the amount of tax that the corporation has failed to deduct or withhold under certain other provisions of the Act. In addition, section 242 imposes criminal liability on a director where a corporation is guilty of an offence under the Act and the director authorized, participated in, acquiesced, assented to, or directed the commission of the offence. Analogous provisions are also found in the Excise Tax Act, Canada Pension Plan and the Unemployment Insurance Act.

In light of the increasing number of cases where directors have been found liable in respect of their corporation's obligations to Revenue Canada, the requirement that directors be resident in Canada is very important. It can be difficult, if not impossible, to recover amounts owing from non-resident directors.

If you have any further questions please contact David Palamar.

Yours truly,

for Director Reorganizations and Foreign Division Rulings Directorate Legislative and Intergovernmental Affairs Branch