{"id":48969,"date":"2026-04-14T10:12:02","date_gmt":"2026-04-14T14:12:02","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=48969"},"modified":"2026-04-14T11:59:49","modified_gmt":"2026-04-14T15:59:49","slug":"separate-legal-personality-of-a-corporation-scope-and-implications-for-shareholders-and-directors","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/commercial-litigation\/separate-legal-personality-of-a-corporation-scope-and-implications-for-shareholders-and-directors\/","title":{"rendered":"Separate legal personality of a corporation: Scope and implications for shareholders and directors"},"content":{"rendered":"\n

Corporate law establishes distinct rights and obligations for corporations, their directors and their shareholders.[1]<\/a><\/p>\n\n\n\n

In the 2025 ruling on the case of 2882540 Canada inc. <\/em>c. Taub, <\/em>2025 QCCS 2769(\u201cTaub<\/em>\u201d)<\/a> , the Superior Court of Quebec (the \u201cCourt<\/strong>\u201d) reaffirmed that a direct consequence of this principle is that a shareholder cannot personally claim damages sustained by their corporation.[2]<\/a><\/p>\n\n\n\n

The Taub<\/em> case: when a sole shareholder cannot sue in their own name<\/h2>\n\n\n\n

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\u2019s 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]<\/a><\/p>\n\n\n\n

However, the Court dismissed the director\u2019s 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]<\/a> Any damages the shareholder may have suffered were characterized as indirect consequences of the alleged wrongdoing.[5]<\/a><\/p>\n\n\n\n

The important distinction between the corporation\u2019s rights and those of its shareholders<\/h2>\n\n\n\n

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]<\/a><\/p>\n\n\n\n

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]<\/a><\/p>\n\n\n\n

In its decision in Taub<\/em><\/a>, the Superior Court reaffirmed that this separation holds even when the shareholder is the corporation\u2019s sole officer and director.[8]<\/a><\/p>\n\n\n\n

This ruling is consistent with the Supreme Court of Canada\u2019s decision in Brunette c. Legault Joly Thiffault<\/em><\/a>.<\/em>[9]<\/a> 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\u2014a bankruptcy that resulted in the shareholder losing the entire value of its shares.[10]<\/a><\/p>\n\n\n\n

On that occasion, the Supreme Court reaffirmed two key principles:<\/p>\n\n\n\n