Limitation of Liability for Directors and Officers in Saskatchewan

Section 112.1 of the Saskatchewan Non-profit Corporations Act, 1995 (the "Act") was introduced in 2003 and offers the best shield against liability for directors and officers of non-profit corporations available anywhere in Canada.

1. Broad General Immunity Rule

Subject to various exceptions and limitations, no director or officer of a corporation incorporated or continued under the Act is liable in a civil action for any loss suffered by any person. For this purpose, loss means any pecuniary or non-pecuniary loss respecting, arising out of or stemming from any act or omission of:

● the corporation; or

● any act director, officer, employee or agent of the corporation in the exercise or supposed exercise of any of his or her powers or in the carrying out or supposed carrying out of any of his or her duties.

The exclusion of liability extends to preclude a corporate right of action to recover damages awarded against, or any amount paid by, the corporation from a director or officer who fits under the liability shield. However, the liability shield protects directors, officers, employees and agents but does not affect the liability of the corporation itself for the loss.

2. Exceptions and Limitations

The liability shield is, however, subject to the following exceptions and limitations:

● The director or officer must have acted in good faith at the time of the act or omission giving rise to the loss.

● The loss must not have been caused by fraudulent or criminal misconduct by the director or officer.

● The act or omission of the director or officer that caused the loss must not constitute an offence against the Act, any other statute of Saskatchewan or any federal statute.

● Another "Act" must not expressly provide otherwise.

The word "Act" is defined under the Saskatchewan Interpretation Act to consist only of statutes of the province of Saskatchewan (or ordinances of the former Northwest Territories that were applicable in Saskatchewan when it joined confederation in 1905). For example, the liability of directors and officers for unpaid wages, salaries, annual holiday pay, public holiday pay, pay in lieu of notice and other debts for services performed for the corporation under the Saskatchewan Labour Standards Act falls under the exception to the liability shield in s. 112.1.

While the exception does not explicitly extend to federal legislation, federal legislation imposing liability on directors for unpaid payroll remittances (including employee income tax, Canada pension plan contributions and employment insurance premiums), income tax and goods and services tax remittances would, under the federal paramountcy doctrine, prevail over provincial legislation purporting to exempt directors from the same liability.

3. Conclusion

Nevertheless, the Saskatchewan legislation extends immunity to directors and officers of Saskatchewan non-profit corporations for general misfeasance. It does not protect directors and officers from liability for their own malfeasance or liability arising under the laws of another jurisdiction, including under federal law.

From the standpoint of a director or officer, an outright immunity from liability is superior to rights of indemnification or to receive insurance coverage. The availability of indemnification depends in part on whether the corporation is solvent and whether those in control of the corporation will honour the obligation to indemnify without litigation to enforce the obligation. Insurers can be expected to resist payment if there are any plausible grounds for doing so. Far better for the director or officer to be immune from liability at the outset than to be liable but have a right to recover the loss from the corporation under an indemnity or from a carrier of insurance coverage.

Arguably, the Saskatchewan liability regime helps to remove a significant barrier that would otherwise discourage volunteers from joining the boards of Saskatchewan non-profit corporations. The Saskatchewan regime helps to thaw the liability chill afflicting the boards of non-profit corporations.