What's the Difference Between Directors and Shareholders in Alberta?
Understanding the key difference between directors and shareholders is critical when setting up a corporation in Alberta.
The Primary Difference: Ownership vs. Management
Shareholders own the corporation, while directors manage it. A shareholder’s ownership interest is represented by shares. Directors are elected by shareholders to oversee management but don’t need to have an ownership interest.
Differences at a Glance
| Shareholder | Director | |
|---|---|---|
| Ownership | Own shares representing their interest | No ownership unless also a shareholder |
| Management | No role unless required by law or agreement | Oversees management of the business |
| Liability | Limited to their investment | Can have personal liability for certain acts |
| Qualifications | None (but subject to tax rules) | Must meet age, capacity, and solvency requirements |
| Term Limit | No limit | Typically fixed terms or reappointed yearly |
| Remuneration | Paid through dividends | Salary or volunteer |
Liability
A shareholder’s liability is generally limited to the amount they invested. Directors have a fiduciary duty to act in good faith and can face personal liability for things like unpaid wages, environmental contamination, and unpaid corporate taxes.
Qualifications
There are no specific qualifications to become a shareholder. Directors must be of age, sound mind, and an individual (not a corporation). Directors typically have set term lengths or are reappointed annually.
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