Duty of care and diligence

exercise their powers with due care and diligence;
ensure that any business decisions are made in good faith and in the best interests of the association;
act in good faith and in the best interests of the association;
not make improper use of information or their position for personal profit;
avoid any conflicts of interest;
exercise powers in accordance with the rules of the association; and
not allow the association to incur a debt when the association is insolvent or there are reasonable grounds to believe that by incurring the debt the association will become insolvent.

While discharging duty of care and diligence a committee member or officer should:

be prepared for meetings (reading any papers and the financial statements);
broadly understand the financial position of the association;
follow up on action items;
keep informed about the association’s operations and activities;
ask questions; and
take steps to ensure that the association meets its obligations under other laws. For example occupational health and safety, taxation and employment.

Duties relating to insolvency

A committee member has a duty to prevent an association incurring debts while it is insolvent or in situations where the debt would cause it to become insolvent. This duty is breached if:

an association incurs debt while it is insolvent or it becomes insolvent by incurring the debt;
before incurring the debt there were reasonable grounds to expect that the association was already or would become insolvent by incurring the debt; and
the person was a member of the committee at the time the debt was incurred.

Allowing an association to trade while insolvent is a serious matter with a high penalty. It should also be noted that a breach of this duty would not make a committee member personally liable for the association’s debt.

To fulfil their duty committee members should all work to ensure:

that accounts are kept of the transactions, financial position and performance of the association; and
the association’s solvency status is monitored on an ongoing basis.

These duties set the basic standards of acceptable conduct. A breach of a duty is a rare event and is usually accompanied by a significant degree of deliberate wrong doing or gross negligence.

Duty offences under the Act require deliberate misconduct and are only applicable in the case of serious and wilful abuse of the officer’s position.

If a committee member or officer makes a business judgement in good faith for a proper purpose they will not be liable for an offence even if the outcome for the association is not ideal.

Committee members must ensure they are fully informed about the association by keeping up to date with matters, attending meetings, reading agendas and minutes and asking questions. In the event of a problem, dispute or legal challenge committee members cannot claim they ‘did not know’ about the rules and activities of the association.

Individual committee members’ responsibilities

Complying with the rules

The management committee is responsible for implementing the association’s rules and ensuring that it meets its obligations under the Act. Committee members must comply with and act within the rules at all times.

All committee members should be supplied with an up-to-date copy of the association’s rules and be familiar with its main and most-used provisions. It may also be beneficial for committee members to bring the rules with them to every meeting. As a minimum, the Secretary should ensure that a copy of the rules is on the table at each meeting.

Conflicts of interest

Committee members must not put themselves in a position where there is a conflict between their duties and responsibilities to the association and their personal interests.

The Act requires members of the committee to disclose any material personal interest they may have in any contract, or proposed contract, entered into or being considered by the committee. A committee member has a material personal interest when that member has a personal interest in a matter which could be seen to compromise their ability to act in the interests of the association and make an impartial decision. The interest may be financial or non-financial. The interest may be financial or non-financial.

Examples of material personal interests include:

the committee member owns a business an association is seeking to contract with to supply it with goods or services;
a relative of the committee member submits an application for employment with the association; and
the committee member serves on the committee for two associations that are competing for the same tender or grant.

In a small, volunteer run association, it can seem difficult to manage these obligations while providing effective management, but members are entitled to expect that committee decisions will reflect the interests of the association rather than the personal interests of its committee members.

It must be remembered that not all personal interests are ‘mate