From Founder to Director: Understanding Basic Duties Under ABCA

Written by Calder Newson​
JD Candidate 2026

You just incorporated your start-up and named yourself and your co-founders as directors, now what? As a founder, you might wear many hats, one being director, but also others, such as shareholder and/or officer. Understanding your obligations as a director from the outset is important. In Alberta, serving as a director carries statutory obligations.

The Statutory Framework
Section 101(1) of Alberta’s Business Corporations Act, RSA 2000, c B-9 (“ABCA”) provides that the directors shall manage or supervise the management of the business and affairs of a corporation.[i]

Section 122(1) of ABCA provides that every director and officer shall:

1. act honestly and in good faith with a view to the best interests of the corporation; and
2. exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.[ii]
   
   

Section 122(1) ABCA can be broken down into a fiduciary duty of loyalty to the corporation under (a) and a duty of care under (b).

Fiduciary Duty/Duty of Loyalty
In Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68 (“Peoples”), the court clarified that the fiduciary duty is owed to the corporation, not just to the shareholders.[iii] If not just the shareholders, then who is included in the corporation's best interests? Well, in BCE Inc. v. 1976 Debtentureholders, 2008 SCC 69 (“BCE”), the court explained that in determining the corporations best interest, it may be legitimate, given the circumstances in each case, for the directors to consider the interests of, among others, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions.[iv]

For founders who wear many hats, it is important to remember that decisions made as directors must be made to advance the corporation’s best interests.

The Duty of Care
The duty of care requires directors to exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.[v] What does that entail? The duty of care does not require directors to make perfect decisions.[vi] Rather, in Peoples, the court explained that the duty of care requires directors to make reasonable business decisions in light of all the circumstances they knew or ought to have known.[vii]

The Business Judgment Rule
For many directors, especially in a start-up environment, there can be concern about whether a difficult or uncertain decision might later be judged harshly if the outcome is unsuccessful. Courts recognize that directors may have more business expertise than the courts. In turn, courts apply a rule called the “business judgment rule,” which limits their ability to second-guess business decisions when directors exercise appropriate prudence and diligence.[viii] With that said, the business judgment rule does not insulate directors from liability simply because they are directors. Rather, it means that the court will not substitute its own view for the directors’ when the business decision falls within a range of reasonable alternatives.[ix]

Evidencing the Exercise of Director Duties
As noted in Peoples, directors must make reasonable business decisions in light of all the circumstances they knew or ought to have known.[x] Indicators that directors exercised their duties may include evidence that the directors, among other things:

• turned their minds to the relevant issues;
• considered risks and alternatives; and
• deliberated in good faith.
  
  

In the start-up environment, decisions might be made quickly and informally. However, the duties under s.122 ABCA apply regardless.

Holding regular board of directors meetings and maintaining meeting minutes could be evidence that directors met their duties. Minutes can reflect that the directors turned their minds to relevant issues, considered risks and alternatives, and deliberated in good faith.

Conclusion
Serving as a director or on a start-up’s board can be both exciting and demanding. Along with the opportunity to shape the direction of a growing business comes the statutory obligations under ABCA. Directors are trusted to manage and supervise management, and must act honestly and in good faith, and with the care, diligence, and skill required by s. 122(1) ABCA.

For founders stepping into the role of director, understanding these duties from the outset provides important context for how corporate decisions are assessed. Courts evaluate not only outcomes, but whether directors acted on a reasonably informed basis and within a range of reasonable alternatives.

This blog provides general legal information about directors’ duties under ABCA.

Note: The above information does not constitute legal advice. No guarantees are made as to accuracy, completeness, or applicability to individual situations.

[i] Business Corporations Act, RSA 2000, c B-9 (“ABCA”) at s.101(1).

[ii] ABCA at s.122(1)(a)(b).

[iii] Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68 (“Peoples”) at para 42.

[iv] BCE Inc. v. 1976 Debtentureholders, 2008 SCC 69 (“BCE”) at para 40.

[v] ABCA at s.122(1)(b).

[vi] Peoples at para 67.

[vii]Peoples at para 67.

[viii] Peoples at paras 64-65.

[ix] BCE at para 40.

[x] Peoples at paras 64-65.