Introduction
If you are on the committee of an Incorporated Association, you should familiarise yourself with the duties you have to your organisation and its stakeholders. For example, if you thought that only company directors have to worry about insolvent trading, you would be wrong.
Duties of Committee Members
For organisations structured as an Incorporated Association in Victoria, these duties arise from the Associations Incorporation Reform Act 2012 (Vic). The duties include:
- The duty not to use your position (or knowledge obtained from your position) to gain an advantage for yourself or another person.
- The duty to exercise your powers with due care and diligence.
- The duty to act in good faith and for a proper purpose.
- The duty to avoid insolvent trading.
More details can be found on the Consumer Affairs website.
Potential Penalties for Committee Members
There are civil and criminal penalties for breaching these duties. The consequences are less severe than those that company directors face, but the civil penalties can still amount to penalties of up to $20,000.
In addition, the Associations Incorporation Reform Act incorporates the insolvent trading provisions of the Corporations Act 2001 (Cth). This means committee members can be personally liable for the debts of their organisation if those debts are incurred while the organisation is insolvent.
Any Tips
To avoid breaching your duties as a committee member of your Incorporated Association, you should:
- Take a proactive role in the decision making process of the committee;
- Make sure you are fully informed before making decisions and, if necessary, obtain professional advice;
- Ensure that you have no material personal interest in transactions carried out by your Association;
- Always act in the best interests of your Association and don't put your (or someone else's) personal interests ahead of the Association;
- Don't allow the organisation to enter into contracts or take out loans unless you're confident the organisation can pay its debts as and when they fall due. If you are in doubt, you should seek the advice of an accountant.
How can Sharrock Pitman Legal help me?
We have helped many committee members with ensuring they comply with their duties, and it would be our pleasure to assist you. We provide fixed prices and offer substantive free benefits to all customers who run a business. Click here for full details. Call Sharrock Pitman Legal today on 1300 205 506.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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