<PAGE>

                                                                   EXHIBIT 10.32

                     THE DIRECTORS' DEFERRED SHARE UNIT PLAN

                           FOR NON-EMPLOYEE DIRECTORS

                                   OF QLT INC.

<PAGE>

SECTION 1. PURPOSE

The purpose of the Directors' Deferred Share Unit Plan for Non-Employee
Directors of QLT Inc. is to significantly strengthen the link between Director
and shareholder interests by tying a portion of Director compensation to the
long term performance of the Shares.

SECTION 2. DEFINITIONS

For the purposes of the Plan:

(a) "Affiliate" means an affiliate of the Corporation as that term is defined in
paragraph 3 of the Canada Customs and Revenue Agency's interpretation bulletin
IT-337R4, Retiring Allowances;

(b) "Award Notice" means the notice, as it may be amended from time to time,
provided by the Corporation to the Director pursuant to Section 5 in connection
with the grant of DSUs hereunder to said Director;

(c) "Beneficiary" means an individual who, on the date of a Director's death, is
the person who has been designated in accordance with Section 13 and the laws
applying to the Plan, or where no such individual has been validly designated by
the Director, or where the individual does not survive the Director, the
Director's executor or legal representative.

(d) "Board" means the Board of Directors of the Corporation;

(e) "Change of Control" means any of the following events:

            (i)   Merger. A merger, consolidation, reorganization or arrangement
                  involving the Corporation other than a merger, consolidation,
                  reorganization or arrangement in which stockholders of the
                  Corporation immediately prior to such merger, consolidation,
                  reorganization or arrangement own, directly or indirectly,
                  securities possessing at least 65% of the total combined
                  voting power of the outstanding voting securities of the
                  corporation resulting from such merger, consolidation,
                  reorganization or arrangement in substantially the same
                  proportion as their ownership of such voting securities
                  immediately prior to such merger, consolidation,
                  reorganization or arrangement,

            (ii)  Tender Offer. The acquisition, directly or indirectly, by any
                  person or related group of persons acting jointly or in
                  concert (other than the Corporation or a person that directly
                  or indirectly controls, is controlled by, or is under common
                  control with, the Corporation) of beneficial ownership of
                  securities possessing more than 35% of the total combined
                  voting power of the Corporation's outstanding securities
                  pursuant to a tender offer made directly to the Corporation's
                  stockholders,

<PAGE>

            (iii) Sale. The sale, transfer or other disposition of all or
                  substantially all of the assets of the Corporation other than
                  to an affiliate of the Corporation as part of a corporate
                  reorganization of the Corporation (for purposes of clause
                  2(e), "affiliate" means, with respect to any entity, any
                  corporation, partnership, association, trust or other entity
                  or organization directly or indirectly controlled by,
                  controlling or under common control with such entity, and, for
                  the purposes of this definition, "control" will mean (1) the
                  possession, directly or indirectly, of the power to direct the
                  management or policies of any such entity or to veto any
                  material decision relating to the management or policies of
                  such entity, in each case whether through the ownership of
                  voting securities, by contract or otherwise, or (ii) direct or
                  indirect beneficial ownership of 40% or more of the voting
                  stock or other securities of, or a 40% or greater interest in
                  the income of, such entity, or such other relationship as, in
                  fact constitutes actual control), or

            (iv)  Board Change. A change in the composition of the Board over a
                  period of 24 consecutive months or less such that a two-thirds
                  majority of the Board members ceases to be comprised of
                  individuals who either:

                  A.    have been Board members continuously since the beginning
                        of such period, or

                  B.    have been elected or nominated for election as Board
                        members during such period by at least a majority of the
                        Board members described in clause (A) who were still in
                        office at the time the Board approved such election or
                        nomination.

(f) "Committee" means the committee of directors of the Corporation generally
responsible for matters relating to Directors' compensation and which is
currently named the Executive Compensation Committee. The Committee shall be
comprised of not less than such number of Directors as shall be required to
permit DSUs granted under the Plan to qualify under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"), and Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
and each member of the Committee shall be a "non-employee director" within the
meaning of Rule 16b-3 and an "outside director" within the meaning of Section
162(m) of the Code;

(g) "Controlled Group" shall mean all members of the Corporation's controlled
group (as defined under Sections 414(b) and 414(c) of the Internal Revenue Code)
for the purposes of Section 409A of the Internal Revenue Code;

(h) "Corporation" means QLT Inc.;

(i) "Director" means a member of the Board who is not otherwise an employee of
the Corporation or of an Affiliate;

(j) "Disability" means, with respect to a participant, when a participant (i) is
unable to engage is any substantial gainful activity by reason of any medically
determinable physical or

<PAGE>

mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not
less than 3 months under an accident and health plan covering employees of the
participant's employer;

(k) "DSU" means a unit credited by means of a bookkeeping entry on the books of
the Corporation to a Participant's account in accordance with the terms and
conditions of the Plan, the value of which, on a particular date, shall be equal
to the Market Value on such date;

(l) "Grant Date" means the date of approval of the grant of DSUs by the Board;

(m) "Key Employee" means an employee defined as a "key employee" in section
4.16(i) of the Internal Revenue Code without regard to paragraph 5 of such
Section 416(i);

(n) "Market Value" on any particular day means the closing price of the Shares
on The Toronto Stock Exchange, or if the Shares are not listed on The Toronto
Stock Exchange, on such other stock exchange approved by the Committee and
agreed upon by the Board on which the Shares are listed, or if the Shares are
not listed on any stock exchange, then on the over-the-counter market, on the
trading day prior to the particular day on which at least one board lot of the
Shares was traded. The Market Value shall always depend on the fair market value
of a Share or a share of a corporation related to the Corporation;

(o) "Participant" means a Director who has been granted DSUs under the Plan;

(p) "Plan" means the Directors' Deferred Share Unit Plan for Non-Employee
Directors of QLT Inc. as amended from time to time;

(q) "Share" means a common share, without nominal or par value, of the
Corporation; and

(r) "Termination Date" shall mean the date on which both the following
conditions are met: the Director (1) has ceased to be a Director as defined
above for any reason whatsoever, including the death of the Director, and (2) is
neither an employee of the Corporation, an Affiliate, or any member of the
Controlled Group, nor a member of the board of an Affiliate or any member of the
Controlled Group.

SECTION 3. CONSTRUCTION AND INTERPRETATION

In this Plan, all references to the masculine include the feminine; reference to
the singular shall include the plural and vice versa, as the context shall
require.

The Plan shall be governed and interpreted in accordance with the laws of the
Province of British Columbia and the applicable laws of Canada.

If any provision of the Plan or part hereof is determined to be void or
unenforceable in whole or in part, such determination shall not affect the
validity or enforcement of any other provision or part thereof.

<PAGE>

Headings wherever used herein are for reference purposes only and do not limit
or extend the meaning of the provisions contained herein.

The Plan shall be effective with respect to the 2005 calendar year and all
subsequent calendar years until amended, suspended or terminated.

SECTION 4. ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Committee, subject to applicable corporate
and securities law requirements.

The Committee is authorized, subject to the provisions of this Plan, to
establish from time to time such rules and regulations, make such determinations
and to take such steps in connection with this Plan as in the opinion of the
Committee are necessary or desirable for the proper administration of this Plan.
For greater certainty, without limiting the generality of the foregoing, the
Committee will have the power, where consistent with the general purpose and
intent of this Plan and subject to the specific provisions of this Plan and any
approval of The Toronto Stock Exchange or any other exchange or trading
facilities through which the Shares are traded or quoted from time to time, if
applicable:

(a) to interpret and construe this Plan and to determine all questions arising
out of this Plan and any DSU granted pursuant to this Plan;

(b) to determine to which Directors DSUs are granted, and to grant, DSUs subject
to Board approval;

(c) to determine the number of DSUs granted, subject to Board approval;

(d) to prescribe the form of instrument relating to the grant of DSUs;

(e) to enter into such grant notice with respect to each grant;

(f) to adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with the laws of Canada, the United States and other
countries in which the Corporation or its Affiliates may operate to ensure the
viability and maximization of the DSUs granted to Participants residing in such
countries and to meet the objectives of the Plan; and

(g) to determine other matters as provided herein.

All actions taken and decisions made by the Committee shall be final, conclusive
and binding on all parties concerned, including, but not limited to, the
Participants and their beneficiaries and legal representatives, the Corporation,
its employees and shareholders. All expenses of administration of the Plan shall
be borne by the Corporation.

Notwithstanding anything to the contrary contained herein, the Board may, at any
time and from time to time, exercise the powers and duties of the Committee
under the Plan without any further action of the Committee.

<PAGE>

SECTION 5. GRANT OF DSUs

DSUs may be granted pursuant to this Plan from time to time by the Corporation
in accordance with the following procedure. The Committee shall recommend to the
Board the terms of the DSU grants as set forth in Section 4. The Board may
approve, modify or reject the recommendations of the Committee in its
discretion. Notwithstanding anything to the contrary contained herein, the Board
may, at any time and from time to time, exercise the powers and duties of the
Committee under the Plan without any further action of the Committee.

The Corporation shall provide to the Director an Award Notice with respect to
grant of DSUs.

The DSUs shall be credited to the account of the Participant as of the Grant
Date.

SECTION 6. VESTING OF DSUs

The DSUs will vest monthly in equal amounts over 36 months beginning on the
first day of the first month after the Grant Date.

If the Participant ceases to be a Director due to death or Disability, all DSUs
shall be immediately vested. Upon the occurrence of a Change of Control, all
DSUs shall be immediately vested. If the Participant is removed as a Director
for cause, all vested and unvested DSUs shall be cancelled.

If the Participant ceases to be a Director due to retirement unrelated to death,
Disability or a Change of Control, the Board may in its sole discretion
accelerate the vesting of the DSUs prior to such retirement to be effective upon
such retirement.

Participant's entitlement to payment of DSUs at the Termination Date shall only
apply to vested DSUs and all unvested DSUs as of the Termination Date shall be
cancelled.

SECTION 7. DIVIDENDLIKE AMOUNTS

A Participant's account shall, from time to time during the term of the
Participant's participation in the Plan, up to and including the Participant's
Termination Date, be credited with additional DSUs, the number of which shall be
equal to the quotient determined by dividing one hundred percent (100%) of the
dividends declared that would have been paid to the Participant if the DSUs in
his or her account on the relevant record date for dividends on the Shares had
been Shares (excluding stock dividends, but including dividends which may be
paid in cash or in shares at the option of the shareholder), by the Market Value
on the payment date of such dividend, with fractions computed to four decimal
places.

<PAGE>

SECTION 8. PAYMENT OF DSUs

The Market Value of the DSUs credited to a Participant's account as at such
Participant's Termination Date, to the extent vested in accordance with Section
6, shall be paid by the Corporation to the Participant (or if the Participant
has died, to the Participant's Beneficiary) in the form of a lump sum cash
payment within 30 days following the Termination Date, less any applicable taxes
and other source deductions required to be withheld by the Corporation;
provided, however, if the Participant is a Key Employee as of the Termination
Date, the payment shall be made on the date six months following the Termination
Date. If a payment date pursuant to this Section 8 falls on a Saturday, Sunday
or banking holiday, then payment shall be made on the next business day.

In the event that, at a Participant's Termination Date, there is no public
market for the Shares, the obligations of the Corporation under the Plan shall
be met by a payment in cash in such amount as is reasonably determined by the
Committee to be equitable in the circumstances based on the value of the Shares
at the time of payment, less applicable withholdings, such determination to be
final and binding for all purposes.

In the event that a Participant's Termination Date would otherwise fall between
the record date for a dividend on the Shares and the related dividend payment
date then, notwithstanding the foregoing provisions of this Section 8, such
Participant's Termination Date shall be deemed to be the day immediately
following the date of payment of such dividend for purposes of recording in the
Participant's account under the Plan amounts referred to in Section 7 hereof and
making the calculation of the value of a Participant's DSUs contemplated by this
Section 8. In the event that the Corporation is unable, by a Participant's
Termination Date, to compute the final value of the DSUs recorded in such
Participant's account under the Plan by reason of the fact that any data
required to compute the Market Value has not been made available to the
Corporation, then, notwithstanding the foregoing provisions of this Section 8,
the Termination Date shall be the next following trading day on which such data
is made available to the Corporation.

SECTION 9. PARTICIPANTS' ACCOUNTS/ADJUSTMENTS TO DSUs CREDITED TO ACCOUNTS

The Corporation shall maintain in its books an account for each Participant
recording at all times the number of DSUs standing to the credit of the
Participant. Upon payment in satisfaction of DSUs credited to a Participant in
the manner described herein, such DSUs shall be cancelled. A written
confirmation of the balance in a Participant's account hereunder shall be mailed
by the Corporation to the Participant at least annually.

In the event of any stock dividend, reorganization, recapitalization, stock
split, consolidation or similar event affecting the number of Shares, the DSUs
credited to a Participant's account under the Plan will be adjusted in the same
manner as if each DSU were a Share. In the event of any exchange of shares or
other change in the Shares into a different number or kind of shares of the
Corporation or of any corporation related thereto, or of any other change in the
Shares or shares into which Shares have been changed or for which they have been
exchanged, such equitable adjustments, as the Committee may reasonably
determine, shall be made with respect to the number of DSUs then recorded in the
Participant's account under the Plan. However, no amount

<PAGE>

will be paid to, or in respect of, a Participant under the Plan or pursuant to
any other arrangement, and no DSUs will be granted nor will any credit be made
to such Participant's DSU account under the Plan to compensate for a downward
fluctuation in the price of Shares, nor will any other form of benefit be
conferred upon, or in respect of, a Participant for such purpose.

SECTION 10. AMENDMENTS TO, SUSPENSION OR TERMINATION OF, THE PLAN

The Board may from time to time amend, suspend or terminate the Plan in whole or
in part. However, any such amendment, suspension or termination shall not
adversely affect the rights accrued to any Participant under any DSUs
outstanding at the time of such amendment, suspension or termination without the
consent of the affected Participant. Notwithstanding the foregoing, any
amendment, suspension or termination of the Plan shall be such that the Plan
continuously meets the requirements of paragraph 6801(d) of the regulations
under the Income Tax Act (Canada) or any successor provision thereto.

SECTION 11. RIGHTS OF PARTICIPANTS

Except as specifically set out in the Plan, no Director, Participant or other
person shall have any claim or right to any Shares or any other benefit in
respect of DSUs granted pursuant to the Plan.

Neither the Plan nor any grant thereunder shall be construed as granting a
Participant a right to be retained as a Director of the Corporation or a claim
or right to any future grants of DSUs.

Under no circumstances shall DSUs be considered Shares nor shall they entitle
any Participant to exercise voting rights or any other rights attaching to the
ownership of Shares, nor shall any Participant be considered the owner of Shares
by virtue of this Plan.

SECTION 12. DESIGNATION OF BENEFICIARY AND DEATH OF PARTICIPANT

Subject to the requirements of applicable laws, a Director may designate in
writing a person who is a dependant or relation of the Director as a beneficiary
to receive any benefits that are payable under the Plan upon the death of such
Director. The Director may, subject to applicable laws, change such designation
from time to time. Such designation or change shall be in such form and executed
and filed in such manner as the Committee may from time to time determine.

In the event of a Participant's death, any and all DSUs then credited to the
Participant's account shall become payable to the Participant's Beneficiary in
accordance with Section 8 hereof.

SECTION 13. COMPLIANCE WITH APPLICABLE LAWS

Any obligation of the Corporation pursuant to the terms of the Plan is subject
to compliance with all applicable laws and the rules of any stock exchange on
which shares of the Corporation are listed. The Participant shall comply with
all such laws and furnish the Corporation with any and all information and
undertakings as may be required to ensure compliance therewith.

SECTION 14. WITHHOLDING TAXES

<PAGE>

The Corporation shall be entitled to deduct any amount of applicable taxes and
other applicable withholdings from any amount paid or credited hereunder.

SECTION 15. TRANSFERABILITY

In no event may the rights or interests of a Participant under the Plan be
assigned, encumbered, pledged, transferred or alienated in any way, except to
the extent that certain rights may pass to a beneficiary or legal representative
upon death of a Participant, by will or by the laws of succession and
distribution.