This instalment deals with the duties of officers of an incorporated association.
Who is an officer
The duties under the Act applies to 'officers' and not just members of the management committee.
The Act recognises that there are persons who do not hold a formal committee position but who nevertheless may be in a position to influence the management committee.
The term 'officer' is defined in the Act to mean any of the following:
- a member of the management committee;
- a person, including an employee of the association, who makes, or participates in making, decisions that affect the whole, or a substantial part, of the operations of the association;
- a person who has the capacity to significantly affect the association's financial standing; and
- a person in accordance with whose instructions or wishes the management committee is accustomed to act,
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but excluding a person who gives advice to the association in the person's professional capacity or to the person's business relationship with members of the committee or with the association.
An officer may include the CEO, or a past committee member who is still actively involved in the association and who has the capacity to influence decisions of the management committee.
Many of the duties are similar to the duties imposed on company directors under the Corporations Act 2001 (Cth).
Duty of care and diligence
An officer of an incorporated association must exercise care and diligence in the exercise of their powers and the discharge of their duties.
The standard is that which a reasonable person would exercise if that person was an officer of the association in the association's circumstances, and occupied the office held by, and had the same responsibilities as, the officer.
A fine of $10,000 applies.
Discharging the duty may include:
- being prepared for meetings (including reading any papers);
- understanding in broad terms the association's financial position;
- following up on action items;
- keeping informed about the association's operations and activities, and asking questions; and
- ensuring compliance with relevant laws affecting the association, including the Act.
The business judgment rule
The business judgement rule is a defence for a breach of the duty of care and diligence obligations.
An officer of the association who makes a 'business judgment' is taken to meet the duty of care requirements if the officer:
- makes the judgement in good faith and for a proper purpose;
- does not have a material personal interest in the subject matter;
- informs themselves about the subject matter to the extent that the officer reasonably believes to be appropriate; and
- rationally believes that the business judgement is in the best interests of the association.
'Business judgement' means any decision to take or not take action in respect of a matter relevant to the operations of the association.
The officer's belief that the judgement is in the best interests of the association is a rational one, unless the belief is one that no reasonable person in the position of the officer would hold.
Duty of good faith and proper purpose
An officer of an incorporated association must exercise his or her powers and discharge his or her duties in good faith, and in the best interest of the association, and for a proper purpose.
A fine of $10,000 applies.
Discharging the duty would require an officer to use their powers only for the benefit of the association and not to secure a private advantage.
Use of Position
An officer of an incorporated association must not improperly use their position to gain an advantage for the officer or another person, or to cause a detriment to the association.
A fine of $10,000 applies.
Discharging the duty would require an officer not to make an improper use of information or their position for personal profit of the profit of a third party.
Use of Information
A person who obtains information because the person is, or has been, an officer of an incorporated association must not improperly use the information to gain an advantage for the person or another person, or cause detriment to the association.
A fine of $10,000 applies.
Examples include disclosing committee discussions about a government tender to another organisation, disclosing employee information, membership or client lists, or financial information to third parties.
Reliance on information or advice
It is a defence to a breach of duty under the Act if an officer has reasonably relied on information or advice given to the officer.
The officer's reliance on the information or advice is taken to be reasonable if:
- the information or advice was given or prepared by:
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- an employee of the association the officer reasonably believed to be reliable and competent in relation to the matter;
- a professional advisor or expert (and the officer reasonably believed the matter to be within that person's professional or expert competence);
- another officer of the association in relation to matters within the other officer's authority; or
- a sub-committee of the association, of which the officer was not a member, in relation to matters within that sub-committee's authority; and
- the reliance was made:
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- in good faith; and
- after making an independent assessment of the information or advice (having regard to the officer's knowledge of the association and the complexity of the structure of the association).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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