A director's fiduciary duty is the statutory obligation to act honestly, in good faith and in the best interests of the corporation itself — not of whichever shareholder put them on the board.
Canada Business Corporations Act, s. 122(1) states the duty in two parts: a director or officer must “act honestly and in good faith with a view to the best interests of the corporation,” and separately must “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” Section 122(1.1) lets a director consider — without being limited to — the interests of shareholders, employees, creditors and the corporation’s long-term interests when applying that duty, and s. 122(3) makes clear no contract, article, by-law or resolution can relieve a director of it. That matters directly for a fund that appoints its own nominee to a portfolio company’s board: the nominee’s fiduciary duty runs to that corporation, not to the fund that put them there, and it does not bend simply because the fund also has views on how the company should be run. One Ontario firm’s guidance for directors puts the practical version plainly: a director who owes this duty must put the corporation’s interests ahead of their own, disclose material conflicts, abstain from voting on contracts they have a personal stake in, and never use confidential corporate information for personal gain.
A fund’s nominee sits on the board of Platform Co. while the fund is separately evaluating an add-on target that would compete for the same regional customers Platform Co. is pursuing. When Platform Co.’s management brings a corporate opportunity to expand into that same territory, the nominee cannot steer it toward the fund’s competing target instead — s. 122(1) puts the corporation’s interest first, and the only proper course is full disclosure of the conflict to the rest of the board and abstention from the vote.
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