On this page
- Introduction
- New to a board or committee? An introduction to your role
- Bringing on a new board member? How to induct a new member
- Legal duties of boards, committees and office holders
- Payment of committee or board members
- Protections for board members
- Insolvency and legal duties
- Financial management and reserves
Introduction
The board or committee of a not-for-profit organisation runs (governs) the organisation. The terms ‘board’ or ‘committee’ can be used interchangeably.
The governance of an organisation is different to the everyday work of the organisation. Boards and committees make strategic decisions about an organisation, while management and staff or volunteers action the governance decisions.
Board and committee decisions can include:
- setting strategic directions
- hiring staff
- whether to take disciplinary action against a member
- which contractors or service providers to engage, and
- what activities to undertake
Good governance means complying with the law and legal duties and carrying out the governance role in the best interests of the not-for-profit organisation.
Good governance includes considerations beyond strict legal duties, such as:
- how meetings are held
- who is on your board and what skills they have
- how new committee members are inducted
- how frequently the board meets, and
- how board papers are prepared and distributed
New to a board or committee? An introduction to your role
As a new board or committee member, you should understand the role of the governing body you sit on as well as your role as a member of that body.
Our fact sheet on the role of board or committee members has been prepared to help new board and committee members understand their roles, so they can contribute effectively to the successful running of their organisation from day one.
The fact sheet covers:
- the role of a board or committee member
- the legal obligations of board or committee members
- the personal liability of board or committee members, and
- what board or committee members should know about their organisation
Bringing on a new board member? How to induct a new member
A properly-functioning board is vital to the success and longevity of any community organisation. The effective operation of a board largely depends on the free exchange of information and ideas between its members.
Ensuring new board members are quickly brought up to speed with the organisation (including its strategy and the environment within which it operates) is an important aspect of every board’s role.
Our fact sheet provides information about the process for inducting people to the governing body of a community organisation.
The fact sheet covers:
- why is board induction important?
- who is responsible for board inductions?
- what should happen before an appointment to the board?
- what should be covered in a board induction?
- performance and development of board members, and
- a checklist to support the board induction process
Legal duties of boards, committees and office holders
The law recognises that directors and committee members, as well as some office holders in not-for-profit organisations, make important decisions about an organisation’s strategic direction and activities.
Because boards and committees have significant power, the law requires them to comply with legal duties like acting in good faith and in the best interests of the organisation. Where the standards set by legal duties are not met, penalties can apply (but this is rare). Sometimes conflicts arise between the personal interests of a director or committee member, and the interests of the organisation. The law also provides a framework for dealing with this situation.
Duties Guide
Our Duties Guide covers the key legal duties of the people who hold a position on the governing body of an Australian not-for-profit community organisation, including incorporated associations, companies limited by guarantee, co-operatives and Indigenous corporations. It also covers the duties that apply to office holders, who may not hold an 'official' position, but based on their influence need to comply with the legal duties as well.
It is a plain-language guide which includes case studies based on common situations that arise in the not-for-profit sector, as well as tips to help committee and board members comply with their legal obligations. The guide specifically includes information about:
- the duty to act in good faith and for a proper purpose
- the duty to act with reasonable care, skill and diligence
- the duty to not misuse information or position
- the duty to disclose and manage conflicts of interest, and
- consequences of breaches of duties
Duties that apply to charities
If your organisation is a registered charity, the ACNC's Governance Standards apply in addition to other sources of duties.
You can find more information on the Governance Standards on the ACNC website. The ACNC has also produced Governance for Good, a guide for charity board members.
Duties that apply to unincorporated groups
If your group is unincorporated, some legal duties may still apply to the leaders of the group, depending on the group's particular circumstances.
For more information about how to run a company limited by guarantee or an incorporated association in Victoria or New South Wales, go to our guides.
Payment of board or committee members
A common question asked by not-for-profit organisations is whether they can or should pay their board or committee members.
Our fact sheet covers:
- what is a payment to a board member?
- can your organisation pay a board member?
- should your organisation pay a board member?
- if your organisation decides to pay a board member, what steps should you follow?
Protections for board members
Board members are accountable (individually and collectively) for their actions and the decisions they make on behalf of the organisation. When a board member fails to comply with their legal duties or responsibilities, there are certain consequences.
If a board member breaches a duty or responsibility even though they took all reasonable steps to comply with their duties and responsibilities, legal protections may be available to them. There are also practical steps that board members can take to protect themselves.
Our fact sheet covers:
- the different protections available to board members
- the difference between volunteer and paid board members
- legal duties and responsibilities of board members
- the thing you can’t protect against – reputational damage
Insolvency and legal duties
Some duties relate specifically to the financial management of an organisation. If you are concerned that your organisation is facing insolvency, it's important to act immediately.
Our fact sheet on insolvency provides useful information for incorporated associations and companies limited by guarantee that are facing financial difficulties or are concerned about becoming insolvent.
Our fact sheet covers:
- what does it mean to be insolvent?
- the duty to prevent insolvency
- consequences of breaching the duty
- protecting against insolvency
- key warning signs of insolvency
- what to do if you think your organisation is insolvent or nearing insolvency, and
- finding insolvency experts
Financial management and reserves
Financial reserves play an important role in the financial stability and long-term sustainability of a not-for-profit organisation. Managing these reserves is an important aspect of the overall financial management of an organisation – a crucial element of good charity governance.
We collaborated with the Australian Charities and Not-for-profits Commission (ACNC) to develop the guidance, 'Charity reserves: financial stability and sustainability'.
The guidance covers:
- what financial reserves are and where they come from
- why it is important to have reserves
- appropriate levels of reserves, and
- who has responsibility for reserves
While this resource is directed at charities, it is relevant to all not-for-profit organisations.
More information
The content on this webpage was last updated in February 2024 and is not legal advice. See full disclaimer and copyright notice.
