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Governance for Associations - New duties create individual committee member liability

Amendments to the Associations Incorporation Act 1981 (Qld), expected to commence in 20221, provide additional statutory duties on management committees. Some of these new duties are very similar to the Corporations Act 2001 (Cth) duties for company directors. Importantly, several new provisions introduce individual liability for Committee Members, with penalties up to $8271.

The new duties and obligations are reviewed below. Whilst the commencement date may be delayed, now is the time to start preparing before the ‘go live’ date. 

1.   Disclosure of material personal interest 

Committee members with a material personal interest in a matter being considered by the committee must disclosure that interest (the nature and extent) and the committee must record that disclosure in meeting minutes. The penalty for inaccurate meeting minutes impacts members individually with a maximum penalty for each member of the management committee set at $551.40.  

The amendments state that committee members who have disclosed a material personal interest are not permitted to be present at a meeting while the matter is being considered and may not vote on the matter. Non-compliance attracts a maximum individual penalty of $8271. The management committee may decide that the member may attend a meeting while the matter is being considered and may vote on the matter. This decision must be recorded in the meeting minutes and again there is an individual penalty of $551.40 for failing to do so.  

Minutes of disclosures and committee decisions on member attendance and voting at meetings must be made available to association members on request.  

Whist material personal interest is not defined in the Act, it is not defined in the Corporations Act either. The courts have said it is an interest that has some real substance to the relevant matter, and which is able to influence a vote or decision. 

2.    Duty to act with the care and diligence of a reasonable person 

Committee members must exercise their powers and discharge their duties (e.g. making decisions on behalf of the association) with the degree of care and diligence that a reasonable person would exercise. This duty can be demonstrated by showing that the committee member:

  • makes the judgment in good faith for a proper purpose; and
  • does not have a material personal interest in the subject matter of the judgment; and
  • is informed about the subject matter of the judgment to the extent the officer reasonably believes to be appropriate; and
  • reasonably believes the judgment is in the best interests of the association.

3.    Duty to act in good faith 

In practice, this duty means avoiding actual or potential conflicts between obligation to the club and personal interests so that decisions made are in the best interests of the Association and for a proper purpose.     

4.    Use of position/Use of information  

The first new section states that a committee member must not improperly use their position to either:

(a) gain, directly or indirectly, a financial benefit or material advantage for them or another person; or

(b) cause detriment to the Association.

A Committee member must also not use information they become aware of because of their position on the management committee to either:

(a) gain, directly or indirectly, a financial benefit or material advantage for them or another person; or

(b) cause detriment to the Association.

5.    Duty to prevent insolvent trading

This duty means that the committee members must not act to incur a debt if there are reasonable grounds to expect that the club is insolvent or would become insolvent by incurring that debt.  

6.    Duty to disclose remuneration details at the Annual General Meeting 

Disclosure of any remuneration paid to members of the management committee, to senior staff and their relatives must be made at the annual general meeting. Details on what must be disclosed and how, will be included in the regulations. 

7.    Grievance procedure

A far-reaching new obligation is the requirement to have an internal grievance procedure or a dispute resolution process in place before the amendments commence. The grievance procedure must include mediation and may provide for a person to decide the outcome of the dispute. In applying the grievance procedure, the Association must ensure that each party to the dispute has been given an opportunity to be heard on the matter and the subject of the dispute. It is also required that the mediator and any person engaged under the rules to decide the outcome of the dispute, is unbiased.

The Office of Fair Trading has stated that a grievance procedure will be added to the model rules and this will be developed in consultation with Associations to enable time for review. This will allow Associations to decide whether they wish to adopt their own procedures in preference to the model rule procedures. The risk for Associations is being un-prepared for the model rule changes and having to adopt and follow the grievance procedures once the amendments are proclaimed. This could create more governance challenges for the management committee to overcome and being prepared now is the best form of risk management. 

8.    Entry powers of officers 

Whilst not an obligation, committee members should be aware of the application of entry and seizure powers to their Association premises. The Fair Trading Inspectors Act 2014 (FTIA) has been amended to include investigations under the Associations Incorporation Act 1981. As a result, once the amendments come into force, FTIA inspectors will have entry and seizure powers, including the power to enter a place where an Incorporated Association carries out its activities, holds its meetings or keeps its records.

If your Association needs assistance to prepare for these new obligations, or the committee could do with some training support to be aware of the individual liability placed on each and every member, contact our team

1The amendments are listed to commence on 22 June 2022, but this has not been confirmed by the government and will not commence until proclaimed.  

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