Unpaid Wages

Unpaid wages can become a financial burden if you are the director of a company that becomes insolvent or goes bankrupt.

Corporate legislation in Canada provides that directors are liable for up to six months of unpaid salary and 12 months of vacation pay owed to employees. In certain provinces the employment standards statutes extend liability to include severance pay. This is contrary to the Supreme Court of Canada's decision that the Canada Business Corporations Act does not render directors liable for unpaid severance pay.

This is most often done by the territorial and provincial governments have enforcement programs in place. The government pays the employees immediately and then recovers the amounts paid. There will also be interest and administrate costs included in this recovery from the directors.

Directors and Officers Liability policies could address this claim. D&O insurance can respond to a claim regarding corporation bankruptcy, employment, economic and breach of fiduciary duty. Talk to your agent or broker. Take control of your insurance.