Directors, Estates, and Fiduciary Duty: Navigating the Overlap in Ontario Law 

• 
  Mike Bronsveld
  Lawyer

When a corporate director passes away, the consequences extend beyond their personal estate. In Ontario, directors hold a fiduciary role within the corporation itself. They are required under both the Canada Business Corporations Act (CBCA) and the Ontario Business Corporations Act (OBCA) to act honestly, in good faith, and in the best interests of the corporation. When this responsibility collides with estate administration, complex legal issues can arise that affect both families and businesses.

Directorships Are Not Inherited

Unlike shares, which are property that can be transferred through a will, a directorship is an office. Section 119 of the CBCA and section 134 of the OBCA are examples of where the law imposes duties on directors personally; these obligations cannot be transferred by inheritance. When a director dies, the office becomes vacant. Executors or beneficiaries do not automatically assume that role, even if they inherit ownership of the deceased’s shares. Without clear corporate by-laws or succession planning, such vacancies may leave the corporation in a state of uncertainty.

Dual Fiduciary Obligations

Estate trustees are bound by the Estates Act and common law to act in the best interests of the estate’s beneficiaries. If a trustee also becomes a shareholder or accepts an appointment as director, they may find themselves navigating two sets of fiduciary duties: one to the estate, and one to the corporation. These obligations are not always aligned. For example, while beneficiaries may press for dividends to support the estate, directors must prioritize the corporation’s ongoing health and the interests of all shareholders. The Supreme Court of Canada in Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68, confirmed that directors’ duties run to the corporation itself, not to individual stakeholders.

Disputes and Litigation Risks

Conflicts frequently arise at this intersection of estate and corporate law. Disputes may involve whether dividends should be declared, who is entitled to board representation, or whether actions amount to shareholder oppression under section 248 of the OBCA. Ontario courts regularly scrutinize these situations, balancing corporate governance principles against estate obligations. Without advance planning, these disputes can escalate into costly litigation.

Proactive Planning and Strategic Advocacy

The most effective way to reduce these risks is through coordinated estate and corporate planning. Shareholder agreements, updated wills, and carefully considered director appointments can provide clarity and stability. Aligning an individual’s estate plan with the governance framework of their corporation helps protect both the business and the family legacy.

At McKenzie Lake Lawyers, we regularly advise directors, business owners, and families on the overlap between corporate and estate law. By addressing these issues before they arise, we help clients safeguard corporate continuity and minimize the risk of conflict. Where disputes do occur, our litigation team is experienced in handling matters such as contested board appointments, dividend and valuation disputes, shareholder oppression claims, and estate challenges involving corporate assets. We provide strategic advocacy to protect our clients’ interests, whether through negotiated resolutions or in the courtroom.

This article was written by lawyer Mike Bronsveld.

If you require assistance with any Commercial Litigation matter, speak to a Lawyer at McKenzie Lake Lawyers LLP by calling (519) 672-5666.