When you join a Board of Directors, which is the board of an incorporated NFP, you aren’t just taking on the typical role of committee member or committee position holder. You are taking on a set of legal responsibilities that you need to be aware of.

ASIC sets out specific requirements for anyone who holds a director role, whether it’s paid or voluntary. Because of the regulations around it, in order to be appointed, the nominated person must sign a notice consenting in writing to be appointed as a director of the company.

ASIC says:

“As a director, you must:

• be honest and careful in your dealings at all times
• know what your company is doing
• take extra care if your company is operating a business because you may be handling other people’s money
• make sure that your company can pay its debts on time
• see that your company keeps proper financial records
• act in the company’s best interests, even if this may not be in your own interests, and even though you may have set up the company just for personal or taxation reasons, and
• use any information you get through your position properly and in the best interests of the company. Using that information to gain, directly or indirectly, an advantage for yourself or for any other person, or to harm the company may be a crime or may expose you to other claims. This information need not be confidential; if you use it the wrong way and dishonestly, it may still be a crime.

Under some circumstances, particularly where the company has knowingly done the wrong thing, a director may personally be held liable for breaches of the law by the company.

For example, trading while insolvent is illegal and if the Board has allowed the organisation to continue its work without having the funds to cover it, they may be held liable.

The best way to protect yourself as Director is to clearly understand your responsibilities, and to ensure your Board gets the proper advice regarding the legislation that applies to themselves and to the NFP.  It may also be worth checking with your NFP regarding the availability Directors’ and Officers’ Insurance.

This article isn’t intended to stop you from taking up a Board role; it’s to make sure you are aware of the expectations that go with it.

Becoming a member of the Board of Directors in a club or NFP opens up avenues for you to make a real difference in the world. It’s worth doing!