When Has a Corporation’s Director Resigned? It’s More Complicated Than You Might Think!

Abstract

Determining when a corporation’s director has resigned can be important for a number of legal determinations, some of them arising under provincial law and some under federal law, but perhaps most often the issue arises for federal tax purposes in Canada. While Canada’s corporation statutes direct that a director’s resignation should be in writing, they do not require that the resignation be provided in a way that makes its communication to the corporation an externally verifiable act. In some of its recent tax cases, the Federal Court of Appeal has committed to just such an approach, following the encouragement of Canada’s federal tax authority. In so doing, the Federal Court of Appeal has arguably departed from what the relevant body of authorities on the provincial corporate law outline as the parameters for a legally valid resignation. While the
underlying considerations which have motivated Canada’s federal tax authorities and courts reflect sensible policy concerns about the value of an objective measure of a director’s resignation, such an orientation represents a break from the prior state in which Canada’s federal courts looked to the appropriate source of provincial law to set the legal parameters to which Canada’s federal tax law is then applied. Legal coherence in Canada’s federal state would be better supported by a clear return to the situation in which provincial corporate law fully complements the federal tax statutes or, if regarded as necessary for policy reasons, a clear amendment to the federal legislation expressly removes such reference.

Note: “Reproduced from [Brian Studniberg:] ‘[WHEN HAS A CORPORATION’S DIRECTOR RESIGNED? IT’S MORE COMPLICATED THAN YOU MIGHT THINK!]’ (2023) [65] Canadian Business Law Journal [115], by permission of Canadian Business Law Journal Inc. and Thomson Reuters Canada Limted.