Governance

What are the core duties and responsibilities of the governing body?
‍

The governing body (that is the board or management committee) is the body responsible for ensuring that the NFP organisation is accountable for its actions and performance.

‍

The role of the governing body is to:

• provide strategic direction
• oversight of the CEO or management
• facilitate accountability to its stakeholders
  
  ‍

The responsibilities of the governing body include:

• determine the NFP’s strategic objectives
• ensure the CEO or management implements the strategic objectives
• supervise and direct the CEO or management
• monitor the NFP’s performance
• ensure there is a system of internal controls
• report to the members
• comply with statutory obligations
• review the governing body’s performance

‍

What are the core duties and responsibilities of ‘officers’ and directors?

‍

The core duties of officers and directors arise under:

• common law – to act bona fide in the interests of the NFP as a whole, that is to act with good faith for a proper purpose and to act with reasonable care and diligence)
• equity – to avoid conflict of interest
• statute

for NFP companies – ss 180-185 Corporations Act;

for NFP incorporated associations – the relevant Associations Incorporation Act;

for charities – the ACNC Act

‍

‍

NFP companies

Section 9 of the Corporations Act defines who is an ‘officer’ of the NFP company.  If an individual’s position falls within the definition of ‘officer’ then that individual has personal duties owed to the NFP.

‍

An ‘officer’ is:

• a director or secretary of the NFP
• a person who makes decision that affect the whole or a part of the business, or has the capacity to affect significantly the NFP’s financial standing, or in accordance with whose instructions or wishes the directors of the NFP are accustomed to act
• a receiver, or receiver and manager, of the property of the NFP
• an administrator of the NFP
• an administrator of a deed of company arrangement executed by the NFP
• a liquidator of the NFP
• a trustee or other person administering a compromise or arrangement made between the NFP and someone else

‍

Examples of ‘officers’ include:

• senior managers
• executive officers (CEOs, CFOs, general counsel)
• company secretaries
• directors

‍

Duties:

‍

1. Duty of care, skill and diligence (s180 (1))

‍The standard expected is that of a reasonable person in the same circumstances

‍

‍What should you do?‍

• Understand the affairs of the NFP to enable you to form a reasonable informed opinion of the finances of the NFP and the capacity of the NFP to meet and contractual obligations it may enter into.
• Ensure you have the basic financial skills to be able to interpret the NFP’s financial records to assess whether or not there is a reasonable basis for suspecting insolvency of the NFP.
  ‍

2. Duty to exercise good faith (s181)

This requires you to act honestly, exercise your powers in the interests of the NFP and to avoid conflicts of interest

‍

What should you do?

• Ensure you exercise independent judgment regarding proposal put before the board.
• Consider the all relevant material and views before arriving at a decision.
• Do not act in a way that should a preference to the interests of a third party rather than to the interests of the NFP.
• Do not vote on motions where there is the potential of breach your duty.

‍

3. Duty not to improperly use his or her position (s182)‍

4. Duty not to improperly use information (s183)

‍

‍

Incorporated Associations

‍

The Associations Incorporation Acts of each State and Territory define an ‘officer’ as:

• a member of the management committee
• the public officer of the NFP
• the secretary
• the treasurer
• the executive officer or employee of the NFP
• any person occupying or acting in any of those positions, whether or not validly appointed to occupy or duly authorised to act in the position.
  ‍

‍

Duties:

‍

1. Duty to exercise good faith

This requires you to act honestly, exercise your powers in the interests of the NFP and to avoid conflicts of interest

‍

What should you do?

• Ensure you exercise independent judgment regarding proposal put before the board.
• Consider the all relevant material and views before arriving at a decision.
• Do not act in a way that should a preference to the interests of a third party rather than to the interests of the NFP.
• Do not vote on motions where there is the potential of breach your duty.

‍

2. Duty of care, skill and diligence

The standard expected is that of a reasonable person in the same circumstances

‍

What should you do?

• Understand the affairs of the NFP to enable you to form a reasonable informed opinion of the finances of the NFP and the capacity of the NFP to meet andy contractual obligations it may enter into.
• Ensure you have the basic financial skills to be able to interpret the NFP’s financial records to assess whether or not there is a reasonable basis for suspecting insolvency of the NFP.

‍

‍

Charities

Charities must take reasonable steps to make sure that its responsible persons understand and carry out the duties set out in ACNC Governance Standard 5.

‍

Standard 5: Duties of responsible persons

‍

The duties are:

• The duty to act with reasonable care and diligence
• The duty to act honestly in the best interests of the charity and for its charitable purposes
• The duty not to misuse their position as a responsible person
• The duty not to misuse information they gain in their role as a responsible person
• The duty to disclose conflicts of interests
• The duty to make sure the financial affairs of the charity are managed responsibility; and
• The duty not to allow the charity to operate whilst it is insolvent.

‍

‍

What are the core duties and responsibilities of the company secretary?

‍

The company secretary duties and responsibilities include compliance with the:

• Corporations Act 2001;
• the Company’s Constitution;
• Australian Securities and Investments Commission (“ASIC”); and
• any other applicable legislation or regulations.

‍

Company Secretary’s Legal Responsibilities

‍

Under section 188 of the Act, a company secretary must:

• maintain a registered office (s142);
• that the registered office of a public company is properly open to the public (s145);
• that the register of office holders kept by ASIC is up to date (s205B)**
• respond to ASIC queries (s346C);
• notify ASIC if the principal place of business changes (s146);
• lodge financial reports with ASIC (if required) (s319(1)).

** this requirement does not apply to a public company that is also registered as a charity with the Australian charities and Not for Profit Commission

‍

Contravention of these requirements are strict liability offences.  However, the current defence of a company secretary having ‘taken all reasonable steps’ remains (s183)

‍

‍

Company Secretary Duties

‍

The usual company secretary duties are to:

• prepare notices and agendas (in consultation with the Chair) for board meetings and members meeting;
• prepare the board papers for each board meeting setting out the reports and documents required by the board;
• record minutes of meetings;
• maintain statutory registers;
• retain key company documents and records;
• ensure lodgement of statutory forms, returns and reports to regulatory bodies such as ASIC and any other relevant body;
• ensure compliance with the Corporations Act and any statutory obligations under the laws and regulations that apply to the company’s business activities;

Other Duties

• advise and monitor the compliance of the directors with their governance responsibilities and obligations;
• guide the Board and management on:

• the Corporations Act;
• the company’s constitution;
• employment laws;
• health and safety in the workplace;
• insurance;
• trade practices and consumer laws;
• environmental compliance;
• superannuation; and
  ‍
• accounting standards;
• signing of contracts and other documentation on behalf of the company;
• prepare policies and manuals (such as a corporate governance manual);
• attend to stakeholder enquiries and administrative tasks;
• liaise with professional advisers (such as accountants and lawyers);
• maintain custody of the Common Seal (if any) and record its use; and
• implement any other tasks required under the Constitution or Board resolutions.

‍

‍

What are the core duties and responsibilities of the public officer?

‍

Section 252(1) of the Income Tax Assessment Act (“Tax Act”) requires that every company be represented by a “duly appointed” Public Officer within 3 months after the company commences to carry on business or derive income in Australia to ensure its various taxation-related obligations and responsibilities are fulfilled. Such person is also Public Officer for all other tax laws (Sec 56 Taxation Administration Act).

In summary, the Public Officer is responsible for ensuring that the company complies with the tax law and for liaising with the ATO concerning the company’s taxation matters.

‍

Public Officer responsibilities

‍

The Public Officer has the following responsibilities is answerable for all things required to be done by the company under the Tax Act (and any other tax laws or regulations) and will be liable for the same penalties.

Note that under the Tax Act any proceedings taken against a company may also include the Public Officer and he or she  may be jointly liable with the company for any penalty imposed; and of particular note any such actions, etc may also be taken against any director or Company Secretary.

‍

‍

Public Officer duties

‍

Typically the Public Officer is the company executive most directly involved with tax and accounting matters whose duties would include signing and lodging various returns with the ATO.

‍