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Role of office holders
An office holder of an incorporated association refers to:
- a committee member
- the secretary
- a person, including an association employee, who takes part in making decisions that affect all or a large part of the association’s operations (generally, this will only be senior employees, for example, where an association has a chief executive officer or chief financial officer)
- a person involved in the association’s management, who can significantly affect the association's financial standing
- a person whose instructions or wishes the committee is used to following; this does not include a person giving professional advice (for example, a religious order may have an incorporated association, but the members, who all belong to the order, follow the direction of the head of the order).
Office holders have certain legal duties. These duties are based upon, and are broadly equivalent to, the duties of a director, as set out in the Corporations Act 2001 (Cth). An office holder must:
- carry out their duties with care and diligence
- carry out their duties in good faith in the best interests of the association, and for a proper purpose (not, for example, their own profit)
- not use information acquired through their position for personal advantage, the advantage of others, or to the detriment of the association.
If an office holder makes a business decision relating to the operation of the association, they must, among other things:
- make that decision in the best interests of the association
- not have a personal interest in the decision.
An office holder may sometimes make a decision affecting the association based on information or advice they receive from other people. These other people may include employees of the association, fellow office holders or professional advisors (such as lawyers or accountants).
The law protects office holders if, in the circumstances, it was reasonable for them to rely on this information or advice and they did so in good faith.
Protection for office holders
Your association must indemnify its office holders from liability for activities they undertake on behalf of the association in good faith. This will protect these individuals (although not where they have deliberately broken the law).
For example, if an office holder is sued for something they have done on behalf of the association and must pay damages, the association must indemnify the office holder. That is, the association will be responsible for paying damages.
The association must provide the indemnity from its assets – the government does not fund this indemnity. Large associations that handle contracts or agreements of significant value may consider taking out officers’ indemnity insurance.
If an office holder does the wrong thing
An office holder may face:
- criminal action if they:
- misuse their position for personal advantage
- deliberately allow the association to trade if it is insolvent
- civil action of up to $20,000 if they:
- misuse information or their position
- breach their duties of:
- care and diligence
- good faith and proper purpose.