Director resignations are a critical but often overlooked aspect of not-for-profit and charitable governance, and when handled improperly, they can leave individuals exposed to significant personal liability even after they believed their service had ended. Recent case law, including Astle v The King, highlights that informal or unclear resignation methods, such as verbal statements or text messages, may be legally ineffective, prolonging a director’s exposure to statutory obligations under the Income Tax Act (Canada) (the ITA), Canada Not-for-profit Corporations Act (CNCA), Ontario’s Not-for-Profit Corporations Act, 2010 (ONCA), and other provincial corporate statutes.
Astle v The King
In Astle v. The King, 2025 TCC 105, the Tax Court of Canada emphasized that a director’s resignation must be delivered in proper legal form in order to be effective.
Facts
The appellant, Kurtis Astle, was a director of a craft brewery and restaurant. On November 1, 2017, after becoming disenchanted with the business, Mr. Astle, sent a text message to the owner stating that he was “done with it all,” and that the business should be sold and its tax obligations satisfied. Although Mr. Astle testified that he had further discussions with the owner regarding the sale of his shares, no formal resignation was prepared or delivered at that time.
In June 2018, while corresponding with the corporation’s counsel about his share sale, Mr. Astle was asked by counsel whether he wished to resign as a director. Acting on legal advice, he submitted a formal written and signed resignation on June 26, 2018.
The timing became crucial when the Canada Revenue Agency assessed Mr. Astle as personally liable for the corporation’s unremitted source deductions. Mr. Astle argued that his resignation occurred in late 2017 and that the assessment was time-barred. The Tax Court rejected this argument, holding that under British Columbia’s Business Corporations Act, a director’s resignation is only effective when a written resignation is provided to the company or its lawyer. The Court also emphasized the need for third parties, such as creditors and regulators, to be able to objectively verify a director’s status, such that there is not reliance on the director’s subjective intent. Consequently, the text message did not meet these requirements, and the effective resignation date was June 26, 2018. Because the CRA’s assessment was issued within two years of that date, Mr. Astle was found liable.
This decision underscores that informal communications do not constitute a valid resignation, and that directors who fail to resign properly risk ongoing personal exposure for a corporation’s liabilities, including unremitted source deductions.
Statutory Director Liabilities
Directors of charities and not-for-profits may be held personally liable for acts or omissions under both the ITA and their organization’s applicable governing statutes.
ITA Director Liability for Not-for-Profits
Under the ITA, directors may be personally liable when a corporation fails to meet certain tax obligations. In particular, the ITA imposes joint and several liability on directors for failures to deduct, withhold, or remit amounts such as:
- employee income tax withholdings,
- Canada Pension Plan contributions,
- Employment Insurance premiums, and
- certain GST/HST obligations.
This liability applies equally to not‑for‑profits, even where they are otherwise exempt from income tax. Directors must take proactive steps to ensure compliance with all payroll and remittance obligations.
ONCA Director Resignation and Liability
ONCA provides that a director’s resignation becomes effective at the time the resignation is received by the Corporation, or at the time specified in the resignation, whichever is later.
Under ONCA:
- Directors are jointly and severally liable for up to six months unpaid wages or any improper payment to members.
- Directors may also face general offence provisions where they authorize, permit, or acquiesce in any act contrary to ONCA.
- ONCA also provides a reasonable due diligence defence in certain circumstances, protecting directors from liability where they can demonstrate they exercised the care, diligence, and skill that a reasonably prudent person would have exercised in comparable circumstances.
This statutory protection underscores the importance of directors actively monitoring compliance and documenting their oversight.
CNCA Director Resignation
The CNCA contains a resignation provision similar to ONCA, with a key distinction: a director’s resignation becomes effective at the time a written resignation is sent to the corporation (and not when it is received), or at the time specified in the resignation, whichever is later.
Under the CNCA, directors may be personally liable:
- jointly and severally,
- for up to six months unpaid wages to employees, with liability extending for up to two years after the individual ceased to be a director; and
- for improper payment to members; and
- for offences committed where a director authorized, permitted, or acquiesced contrary to the CNCA.
Like ONCA, the CNCA provides a due diligence defense, allowing directors to avoid liability where they can demonstrate the appropriate care and diligence in overseeing corporate obligations.
Alberta and British Columbia
Alberta’s Societies Act (ASA) does not prescribe when a director’s resignation becomes effective. Therefore, it is important that all resignation procedures are properly documented in the society’s governing documents. Additionally, the ASA does not impose any personal liabilities on directors.
Under British Columbia’s Societies Act (BCSA), director resignations are effective on the date received by the society (mirroring ONCA) or the date specified in the resignation, whichever is later. Furthermore, directors are jointly and severally liable for authorizing a distribution of either money or other property contrary to the BCSA. However, a due diligence defense is available if the directors reasonably relied on certain documents or facts.
Quick Comparison Chart
See below for a quick “at-a-glance” reference:
| Ontario (ONCA) | Federal (CNCA) | Alberta (ASA) | British Columbia (BCSA) | |
| When a director’s resignation takes effect | When received by the corporation, or later specified date | When sent in writing to the corporation, or later specified date | silent | When received by the corporation, or later specified date |
| Liability for unpaid wages | Up to six months’ wages | Up to 6 months’ wages, subject to a two-year limitation period after ceasing to be a director | silent | silent |
| Improper payments / distributions | Director liability for improper distributions | Liable for unlawful payments / distributions | silent | Liable for improper distribution of property |
| Due diligence defense | Reasonable due diligence defense recognized | Reasonable due diligence defense recognized | silent | Reasonable due diligence defense recognized |
Takeaways for Good Resignation Protocols
The Court’s reasoning in Astle v. The King highlights the importance of ensuring director resignations are conveyed in a manner that is unmistakably clear, unequivocal and documented in proper legal form.
Even where a statute does not require a written resignation, best practices include:
- providing a signed resignation, delivered in accordance with the corporation’s governing documents or, if silent, to the corporation’s registered office or its legal counsel;
- ensuring the resignation is properly recorded in the corporation’s minute book;
- avoiding reliance on verbal resignations or informal communications, such as text messages or resignations at meetings, which may be ambiguous or unenforceable;
- updating the corporate by-law or terms of reference to include a clear, precise resignation procedure, including when a resignation is deemed effective; and
- maintaining an accurate record of directors, including filings with the appropriate corporate registrar and CRA (as applicable), to reduce uncertainty and minimize personal responsibility.
Directors should remember that they may remain personally liable for actions or omissions that occurred while they served as directors, even after they resign. To start the limitation period for any potential claims, the date of resignation must be clearly documented.
If you have any questions about director liability or resignations in relation to not-for-profits and charities, please contact a member of the Cassels Charity & Not-for-Profit team.