Illustrative example based on the kinds of matters we handle — not a specific client engagement; outcomes depend on the facts.
The situation
In this representative scenario, an individual served as a director of a small operating company. After a strong few years the business ran into trouble: a key customer left and cash flow tightened. The corporation began using the GST/HST it had collected from customers to cover payroll and suppliers rather than remitting it to the Canada Revenue Agency. The director treated this as a short-term bridge a large receivable would soon cover. It never came in, the company wound down, and the unremitted GST/HST was never paid.
More than a year later, unable to collect from the now-defunct corporation, the CRA assessed the director personally under section 323 of the Excise Tax Act, for several reporting periods of unremitted net tax plus penalties and years of compounded interest, well beyond the original amount and long after the director had assumed the corporate chapter was closed.
The challenge
Director's liability for unremitted GST/HST is one of the few situations where the CRA can look past the corporation and pursue an individual. Under section 323, a director can be held jointly and severally liable for net tax the corporation failed to remit. The exposure had several moving parts:
- The due-diligence defence — subsection 323(3). A director is not liable if they exercised the care, diligence and skill a reasonably prudent person would have to prevent the failure. The test looks at what the director actually did, not at after-the-fact regret, and the record there was thin.
- The two-year limitation — subsection 323(5). No assessment can be made more than two years after a person last ceased to be a director, so when the resignation legally took effect, and whether it could be proven, was central.
- Conditions precedent — subsection 323(2). The CRA must first clear a procedural threshold, such as a registered but unsatisfied certificate of the corporation's debt in Federal Court.
- Live collections pressure. Because the assessment was personal, the director's own accounts and home equity were now exposed to CRA collections.
How we approached it
A section 323 file is really two cases at once: a defence to the assessment, and a parallel effort to manage personal collections while it is resolved.
- Pin down the resignation date. The first question is whether the person was even a director within the window the CRA can reach. We gathered the corporate minute book, any resignation letter, the provincial registry filings, and records of who actually managed the company. Where a resignation took effect earlier than the CRA assumed, the two-year limitation can put some or all periods out of reach, and that evidence must be assembled carefully rather than asserted.
- Build the due-diligence record. We documented the concrete steps the director took to try to ensure remittances were made: questions raised with the bookkeeper, instructions given, monitoring of the remittance account, and how the director acted once problems surfaced. The governing case law distinguishes a passive director from one who took genuine, proactive steps, so the submission focused there.
- Test the CRA's preconditions. We checked whether subsection 323(2) had been satisfied and whether the corporate net-tax figures were correct, since an inflated corporate assessment flows straight through to the director.
- Protect the individual meanwhile. A notice of objection preserved the right to appeal to the Tax Court of Canada, and we opened a separate line to CRA collections to manage the personal exposure while the objection was outstanding.
Our director's liability page and GST/HST audits and disputes page explain these defences further, and the guide on director's liability for source deductions and GST/HST walks through how these assessments arise.
The outcome
In this illustrative scenario, the limitation argument and the due-diligence record together changed the picture. Where a resignation is proven to have taken effect outside the two-year window, the periods outside it can be removed entirely; where the due-diligence evidence is strong, the remaining exposure can be reduced or, on the right facts, vacated on objection or appeal. What can happen here, framed as a possibility rather than a promise, is that a personal assessment for the full corporate net tax plus years of interest is substantially reduced, with personal collections paused while the dispute is worked through. Every section 323 matter turns on its own resignation evidence and record of what the director did.
The takeaway
Director's liability for unremitted GST/HST is not automatic, and a personal section 323 assessment is not the final word. Two questions usually decide it: were you still a director within the two years the CRA can reach, and can you show the diligence you exercised to prevent the failure to remit. Both depend on records far easier to assemble before a company winds down than after — a resignation properly filed with the corporate registry, and a contemporaneous trail of the steps taken to keep remittances current. If you have received a personal assessment, our pages on CRA collections and garnishment and Tax Court of Canada appeals, and the guide on cancelling interest and penalties through taxpayer relief, are useful starting points.
Results vary and depend on the specific facts of each matter. Past results do not assure a similar outcome. This is an illustrative scenario provided for general information and is not legal advice.