Corporate law establishes distinct rights and obligations for corporations, their directors and their shareholders.[1]
In the 2025 ruling on the case of 2882540 Canada inc. c. Taub, 2025 QCCS 2769(“Taub”) , the Superior Court of Quebec (the “Court”) reaffirmed that a direct consequence of this principle is that a shareholder cannot personally claim damages sustained by their corporation.[2]
The Taub case: when a sole shareholder cannot sue in their own name
In this case, the Court had to determine whether the corporation was entitled to damages arising from the alleged negligence of the professionals it had hired to represent it. After proceedings were initiated, the corporation assigned its assets and declared bankruptcy. Subsequently, the corporation’s sole shareholder and director filed an amended claim to add a personal cause of action, alleging that he had personally suffered damages corresponding to the loss in value of his investment in the corporation.[3]
However, the Court dismissed the director’s personal claim on the basis that, as the sole shareholder, he lacked the necessary legal interest. The Court found that only the corporation may claim damages it has itself sustained.[4] Any damages the shareholder may have suffered were characterized as indirect consequences of the alleged wrongdoing.[5]
The important distinction between the corporation’s rights and those of its shareholders
This judgment reaffirms a fundamental principle well established years ago by the Supreme Court of Canada: a shareholder who chooses to benefit from the advantages of separate corporate personality must also accept its disadvantages.[6]
By incorporating and benefiting from the protection afforded by the principle of separate legal personality, a shareholder gains limited personal liability but accepts that the corporation is the sole holder of the rights and remedies associated with any damages it may sustain.[7]
In its decision in Taub, the Superior Court reaffirmed that this separation holds even when the shareholder is the corporation’s sole officer and director.[8]
This ruling is consistent with the Supreme Court of Canada’s decision in Brunette c. Legault Joly Thiffault.[9] In that case, a shareholder sought to sue professionals for alleged errors in implementing a tax structure that ultimately contributed to the bankruptcy of a group of corporations—a bankruptcy that resulted in the shareholder losing the entire value of its shares.[10]
On that occasion, the Supreme Court reaffirmed two key principles:
- First, a corporation has a separate legal personality and its own patrimony, such that the right of action rests with the corporation where the fault is directed at the corporation when it’s the victim of a wrongful act.
- In return for the protection of limited liability, a shareholder accepts that the rights and remedies associated with damages sustained by the corporation belong to the corporation itself, not to the shareholder personally.
Therefore, a shareholder cannot personally exercise a right of action belonging to the corporation, as the two entities are distinct legal persons, and the benefits of incorporation necessarily entail this consequence.[11] In such cases, the shareholder must generally act through the corporation.
To bring a personal claim, a shareholder must demonstrate that a distinct obligation was owed to them personally, and that they sustained direct loss that is separate from that of the corporation.[12] It follows that a loss in share value constitutes indirect damage resulting from harm suffered by the corporation and does not support personal action by the shareholder.[13]
When can a shareholder still act?
The principle of separate legal personality does not mean that a shareholder is always without recourse when the corporation fails to act. Certain mechanisms allow an interested party to seek court authorization to bring proceedings on behalf of the corporation where the corporation itself, or its officers, refuse to act.
This type of remedy is designed to prevent the corporation from suffering harm that goes unaddressed due to governance failures or internal inaction. It therefore allows, in carefully defined circumstances, for the inaction of officers to be overcome while still respecting the corporation’s separate legal personality. [14]
Key takeaways for investors, shareholders and directors
The Taub judgment reaffirms that if a corporation suffers harm, it is the corporation that must take action. A shareholder’s loss of investment value, however significant, will most often remain an indirect consequence that does not support personal action.[15]
Nevertheless, a shareholder is not entirely without recourse if the corporation itself does not exercise its rights. In certain circumstances, an interested party may seek court authorization to act for and on behalf of the corporation.[16] The Supreme Court of Canada has confirmed that this type of remedy exists to ensure that the corporation’s rights can be enforced, even if its officers neglect or refuse to do so.[17]
For investors and directors alike, the lesson is clear: personal remedies for damages sustained by their corporation are constrained by the principle of separate legal personality and are only available in specific, well-defined circumstances.
If you have questions about your rights as a shareholder, director, or investor in relation to litigation involving your corporation, Commercial Litigation lawyers at Miller Thomson such as Philippe A. Couture-Ménard can help you assess your options and develop a strategy tailored to your business objectives.
[1] Civil code of Québec, Chapter CCQ-199; Business Corporations Act, CQLR c S-31.1; Canada Business Corporations Act (R.S.C., 1985, c. C-44).
[2] 2882540 Canada Inc. c. Taub, 2025 QCCS 2769, paras. 10-11.
[3] Id., paras. 4-5.
[4] Id., paras. 11-12.
[5] Id., para 67.
[6] Houle v. Canadian National Bank, [1990] 3 SCR 122, pp. 185-186; Paul Martel, La société par actions au Québec, vol. 1, update 116 (October 2025), paras. 31‑16 to 31‑22.
[8] Supra, note 2, paras. 60-63.
[9] Brunette c. Legault Joly Thiffault,2018 SCC 55 [Brunette].
[10] Id., pp. 490-491.
[11] Id., pp. 499-500.
[12] Martel, supra, note 6, paras. 31‑21 to 31‑22.2.
[13] Supra, note 10, pp. 501-502.
[15] Lacroix c. Xerox Canada ltée, 2022 QCCS 3009, paras. 60-63.
[16] Supra, note 10, pp. 498-501; Martel, supra, note 6, paras. 31-23 to 31-28.
[17] Brunette, id.
