The legal duties of a not-for-profit (NFP) director depends, in part, on the legal form of the organisation they help govern. Generally speaking, NFP directors are subject to both legislative and general law duties.
Directors of companies limited by guarantee
The principal Act governing the duties of directors of companies limited by guarantee is the Corporations Act 2001 .
Director duties under the Corporations Act 2001 include, but are not limited to:
- Care and diligence - exercise their powers and discharge their duties with the care and diligence that a reasonable person would have if they were a director of a company in the company’s circumstances and occupied the office held by, and had the same responsibilities as, the director.
- Good faith - exercise their powers and discharge their duties in good faith in the best interests of the company and for a proper purpose.
- Improper use of position - not to improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the company.
- Improper use of information - not to improperly use information obtained through your position to gain an advantage for themselves or someone else, or to cause detriment to the company.
- Disclosure - material personal interests must be disclosed in a wide range of circumstances.
- Insolvency - prevent insolvent trading by the company.
Directors of incorporated associations
By contrast, duties on directors of incorporated associations that operate within a particular state or territory, are imposed by the Associations Incorporations Act that relates to that particular state or territory.
There are potentially hundreds of other Commonwealth, state and territory statutes that could impose liability on directors of NFPs depending on the activities of the NFP. An example is state-based occupational health and safety legislation.
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