As we launch this, we are starting with the essentials. Whether you are considering your first board appointment or expanding your portfolio of directorships, understanding the foundational elements of board governance is helpful.
Understanding Organizational Structure
What type of organization you are considering shapes the board requirements and governance practices. Only corporations, not-for-profits, and Crown corporations have legal requirements for having a board.
Partnerships operate without boards of directors entirely. While they can create advisory “boards,” they are not legally required or recognized.
Corporate Boards: The Fundamentals
Legal Requirements
Under both the Ontario Business Corporations Act and Canada Business Corporations Act, every corporation must maintain at least one director, with publicly traded companies requiring a minimum of three. The basics of the board’s job is to supervise management of the corporation's business and affairs.
The distinction is important: the board’s responsibilities are oversight, not day-to-day operations. Companies maintain considerable flexibility in structuring their boards through their articles of incorporation and bylaws. They can specifying the minimum and maximum director ranges (or fixed numbers), when and how directors are elected and what kind of committees the board needs to operate.
Director Eligibility
To serve as a corporate director, you must:
Be at least 18 years of age
Have mental capacity to manage property
Not be in undischarged bankruptcy
Be an individual (corporate entities cannot serve as directors)
Residency considerations vary by jurisdiction. Ontario-incorporated companies have no residency requirements under the Corporations Act, though certain tax incentives may require resident directors. For federally incorporated companies, at least 25% of directors must be Canadian residents (or at least one director if the board has fewer than four members).
Core Board Responsibilities
Directors shoulder two fundamental legal duties:
Fiduciary Duty: Acting honestly and in good faith in the corporation's best interests
Duty of Care: Exercising reasonable care, diligence, and skill in comparable circumstances
These translate into six key governance areas:
Risk Management involves identifying and mitigating business risks across operations, legal compliance, and strategic initiatives—often the most critical board function.
Executive Oversight encompasses hiring, evaluating, and when necessary, terminating senior management, including CEO selection and compensation decisions.
Succession Planning ensures continuity in senior leadership transitions.
Compliance maintains adherence to laws, regulations, corporate documents, and shareholder agreements.
Financial Oversight includes reviewing financial statements and ensuring robust internal controls.
Strategic Oversight provides guidance on corporate direction, with the specific role varying based on management preferences and board culture.
Director Elections and Terms
Shareholders elect directors, typically at annual meetings. Many corporations stagger director terms to ensure board continuity and so members can pass institutional knowledge on to newly elected directors.
Specific processes—term lengths, voting procedures, nomination processes—are detailed in the corporations bylaws, making these documents essential reading for prospective directors.
Understanding Director Liability
Board service carries inherent risks. Directors can face personal liability for specific corporate obligations, including:
Employee wages (up to six months) and vacation pay (up to 12 months)
Statutory duty violations
Breaches of fiduciary duty or duty of care
However, significant protections exist for directors who act in good faith, prioritize corporate interests, and exercise reasonable judgment—topics we'll explore in depth in future posts.
Beyond Private Corporations
Crown Corporations—government-owned entities like the Bank of Canada or Canada Post—offer some really cool board opportunities. Directors are appointed by relevant ministries, with Ontario appointments managed through the Public Appointments Secretariat. A key distinction: officers or employees cannot serve as directors, except for the CEO.
Not-for-Profit Corporations under federal or provincial law have many similarities with for-profit governance, with a couple exceptions. Organizations accepting donations require at least three directors (minimum two non-employees), and director majorities cannot be related to each other to avoid private foundation classification.
What to Expect from The Minutes?
We are hoping for The Minutes to be an expansive guide to the world of governance in Canada. This includes being of service to people looking to get on their first board to experienced directors.
You can expect interviews with inspiring board members and people involved in all aspects of board governance.
With an ever increasing speed of change, directors are expected to know more and more about topics like diversity, AI, sustainability, cybersecurity, and others.
Whether you're evaluating your first board opportunity or expanding your governance portfolio, we want The Minutes to be a useful resource.
Board Opportunities
Looking to get in front of interested and committed candidates for open board positions? Hit reply to this email and we will feature your notice in upcoming issues.
Interested in board service? The City of Toronto Public Appointments manages fascinating municipal organization opportunities, including positions with Toronto Public Library and Toronto Global. These roles offer excellent experience in public sector governance while contributing to community impact.