tip of the week

December 2019

Term Limits: Hitting the Start Over Button

December 26/19

Many groups have term limits. Some of them are three terms of three years each. That would be a maximum. After someone has served for nine years, it is time to thank them and get a new board member. 

There are groups that believe that after nine years you need to leave the board for a year and then start a new term. That is not the intention of term limit. The intention is that nine years is enough for a board member to serve on a board. A term limit is not a rule about consecutive years on a board, it is an absolute limit. An example would be the American presidency, once a president has served two terms, they can no longer run for that office, ever. That is how a term limit works.  

Board policy should clarify the policy about how many terms in total that a board member should serve during their lifetime.


Board function vs function of management

December 19/19

The role of the board is to set and monitor the strategic direction of the organization. The role of management is to implement the wishes of the board. If the board gets involved in the management of the organization then they are doing management’s job. 

Remember the concept of nose in – hands off. If the board is doing management’s work then who is doing the board’s work?  A board can’t provide oversight over their own work, so how can a board provide both the management and the review? If the board members want to do management, then the organization will need to find and name another group who is willing to fulfill the oversight role.


Should You Sign Your Minutes?

December 12/19

What makes your minutes official? Minutes are approved at the next meeting. Until the minutes have been approved, they are draft minutes. The agenda at every meeting includes the item, “approval of the minutes.”  The minutes from the last meeting are considered and if they are accurate they are approved. If changes are needed, the changes are made and then the minutes are approved. 

What is the purpose of signing the minutes? The signing of the minutes is done by the secretary and the signature means that these minutes are the ones that were approved at the meeting. The signing of the minutes is what differentiates the draft minutes from the official minutes. 


De facto director

December 5/19

Directors of corporations can be required to pay source deductions which are actually owed by the corporation. Obviously this is not desirable and only occurs when the corporation is not able to pay their own bills. When a director is assessed by CRA to pay a corporate debt personally, it is referred to as derivative tax liability. There is a two year limitation period however. 

A director must be assessed by CRA within two years of the date when they ceased being a director. Sometimes a director resigns in order to start the clock ticking on that two year assessment period. However, if a director continues acting as a director, even though they have resigned, the fact that they have resigned is not relevant.

A director who is appointed is a De Jure director. A director who acts as a director is a De Facto director and CRA will only consider the two year period to have expired when a person is neither a De facto nor a De Jure director.  If you resign as a director you should also stop fulfilling the duties of a director.