Broadly Defining a Director’s Duty in Bill C-97

• Author: Omar Ha-Redeye
• Date: August 11, 2019

Corporations are essential to the modern economy. They allow for the organization and strategic application of capital in focused manner that allows for wealth to grow, and have been a fundamental legal innovation for the emergence of the capitalist economy.

Of course, corporations as legal entities are a legal fiction that converts what would otherwise be a piece of property into a party with its own free-standing rights. These rights are limited, however, and continue to be defined.

The Court in cases like Irwin Toy Ltd. v. Quebec and British Columbia Securities Commission v. Branch confirmed that although they enjoy some Charter rights, they do not have the same type of individual rights as natural persons under s. 7 of the Charter. However, in R. v. Big M Drug Mart Ltd and R. v. Wholesale Travel Group Inc., the Court also confirmed that where a corporation is accused of a criminal offence or is a defendant in a civil proceeding by the state, they may raise the Charter as a defence.

On July 25, 2019, the Supreme Court of Canada granted leave in 9147-0732 Québec inc. c. Directeur des poursuites criminelles et pénales, a Quebec Court of Appeal decision that ruled that s. 12 Charter rights against cruel and unusual punishment could also apply to corporations. Doug Beazley explains what this decision means in National Magazine,

The appeal court stated that legal persons can suffer from cruel and unusual punishment to the degree that their corporate discomfort leads to suffering for flesh-and-blood people. In other words, a punitive fine that leads to layoffs or bankruptcy, or compromises the stability of an employee pension plan, could engage a company’s rights under s. 12.

Despite some recent controversy over how corporations received their legal personhood in America, the origins of this concept goes back much further in history. Samuel Williston wrote in the Harvard Law Review in 1888 about the origins of the corporation, even before the East India Company in 1600,

The general idea of a corporation, a fictitious legal person, distinct from the actual persons who compose it, is very old. Blackstone ascribes to Numa Pompilius [753–673 BCE] the honor of originating, the idea. Angell and Ames are of the opinion that it was known to the Greeks, and that the Romans borrowed it from them.

This narrative though likely reflects a highly Eurocentric perspective, and Vikramaditya S. Khanna of Michigan Law School points out that the ancient Indian Maurya Empire used a corporate form for centuries before the Romans, from at least 800 BCE. The oldest continuously operating corporations though are most likely found in places like Japan and Austria.

Williston explains that the Romans utilized distinct corporate forms. The fiscus created a personhood for existing groups of shared interests such as priests, artisans, blacksmiths, and bakers, and operated more as a business association, as their members still worked individually. The societates were less frequently used, but were contractual in nature. They could incur obligations, but were dissolved by will or death of a single member.

These different forms also reflect some of the different philosophies around the purpose and role of corporations, including whether they are pre-existing groups of people that the state formally recognizes, or that are created entirely by the state for purposes and utility that the state sees fit. These philosophies also found their way into the controversial 2010 SCOTUS decision in Citizens United v. Federal Election Commission and commentary around it.

In a democracy we must insist that the state still reviews this purpose of the corporation, to ensure its ongoing...