Legal duties apply to anyone involved in the governing of their company or incorporated association, whether it operates for profit or not-for-profit.
It extends to anyone who has ‘control or influence’ over the governance of an organization, even if they do not hold an official position.
The 4 main duties are:
- The duty to act in good faith in the best interests of the entity, and for a proper purpose.
- To act with reasonable care, skill and diligence (including the duty to prevent insolvent trading)
- To not improperly use your position (or any information gained from that position)
- The duty to disclose and manage any conflicts of personal interest.
Other sources of personal liability for directors come from other laws including Tax, WHS, Consumer, Employment and Environment legislation or other law specific to their industry.
The ‘business judgement rule’ can provide some defence at law, but it has limitations. An indemnity clause in your rules or Constitution also has some significant limitations as well, which a lawyer can advise on.
Warren Tapp
