Many people give back to their community by volunteering on boards or committees for organisations such as sporting clubs, parents and friends associations, or not-for-profit groups.
These positions are generally unpaid, however the risks, duties and responsibilities of being such an officeholder are arguably as high as those positions in profit-making businesses. The law expects that board or committee members will fulfil their duties competently and often to a very high standard.
What is the role of a board or committee?
The role of a board or committee is one of governance. This includes:
- Setting the strategic plan and direction of the organisation
- Setting the annual budget
- Approving major expenditure
- Appointing and reviewing the performance of the CEO
- Support and mentor the CEO
- Risk oversight
- Meeting regularly in accordance with the Constitution
- Executing legal and financial documents on behalf of the organisation
The board or committee should not usually be involved with operational matters. That is, the day to day running of the business activities of the organisation. This is the responsibility of the CEO and the staff of the organisation.
What are the risks, duties and responsibilities of being on a board or committee?
In all dealings with and for the organisation, board or committee members have a duty to:
- Avoid conflicts of interests
- Act with loyalty and good faith
- Not improperly use their position or access to information
- Maintain strict confidentiality
In addition, board or committee members have the same strict legal obligations that apply to businesses which operate for profit, including:
- Ensuring that the organisation remains solvent. That is, ensuring that the organisation can pay all of its debts as and when they fall due. It is possible for a board or committee member to become personally liable for debts which are incurred at a time when the board or committee member knew, or ought to have known, that the organisation could not pay that debt as and when it fell due.
- Ensuring that all financial, audit and taxation obligations are met. It is possible for a director of an organisation to become personally liable for certain tax debts which are incurred but remain unpaid in certain circumstances.
- Ensuring that all workplace health and safety obligations are met
- Ensuring that the organisation and its employees comply with all relevant anti-discrimination legislation
- Ensuring that the organisation operates in accordance with its constitution or Articles of Association
- Ensuring that any changes to the structure or membership of the organisation are reported to the appropriate governing body, such as ASIC or the Office of Fair Trading
- Where applicable, ensuring that all requirements of the organisation’s funding bodies are met
How do I minimise the risks to me personally?
Always ensure that your organisation provides you with adequate officeholder’s liability insurance. This won’t protect you from liability if you wilfully engage in any unlawful activities, but may indemnify you for certain claims arising from your role as a board or committee member.
Always ensure that you are provided with regular, accurate and up to date information about the organisation’s financial position and compliance with other obligations. Ask questions if you have any doubts.
Remain actively involved in the organisation, especially at board or committee meetings. It is no excuse to claim that you thought someone else would check the accuracy of the finances, or you thought that someone else would ask the questions that need to be asked.
If this article has raised any concerns for you or your organisation please do not hesitate to contact either John Hayward or Kate Smith on (07) 4046 1124, for advice specific to your circumstances.