Item 3 of 6 · back to the agenda
Charity boards: the six duties of a Responsible Person
On a registered charity’s board, the members are generally what the ACNC calls Responsible People, and ACNC Governance Standard 5 requires the charity to take reasonable steps to make sure its Responsible People meet six duties. They run from acting with reasonable care and diligence to not allowing the charity to operate while it is insolvent.
General information, not legal advice. The official place to check is the ACNC’s Governance Standards guidance, including its page on the duties of Responsible People.
3.1
Who is a Responsible Person
The ACNC uses the term for someone responsible for governing a charity. Generally, that means its board or committee members, or its trustees. The name changes with the structure: in the ACNC’s factsheet, they are the committee of management of an incorporated association, the directors of a company, a co-operative or an Indigenous corporation, and the trustees of a trust, or the directors of a corporate trustee.
A chief executive, company secretary or public officer is a Responsible Person only if they are also a member of the governing body. Someone invited to brief the board, without the right to move motions or vote, is unlikely to be one. A founder with no official title who attends meetings, votes and guides the charity’s direction may be one. Temporary appointments count too, and the ACNC must be told of them.
3.2
Six duties, in the ACNC’s words
Each card gives the duty as Governance Standard 5 states it, then the ACNC’s own explanation or example.
Act with reasonable care and diligence
Responsible People need to understand and stay informed about the charity’s activities and finances. The ACNC says failing to attend several board meetings in a row may breach this duty, while missing time through illness does not. They may rely on another person’s expertise, as long as they inform themselves and assess that advice independently.
Act honestly and fairly in the charity’s best interests, and for its purposes
The ACNC says Responsible People must reach their decisions by weighing up honestly what is best for the charity and what advances the purposes set out in its governing document. The ACNC’s example of a breach: charity property or money used with no real benefit to the charity or its purposes.
Not misuse the position, or information gained in it
The ACNC’s examples: being involved in the charity paying a company owned or controlled by a friend or relative more than is reasonable for the goods or services, or passing confidential information about the charity to another organisation, even another charity.
Disclose conflicts of interest
Responsible People should disclose any actual or perceived conflict of interest, and should not discuss or vote on the matter. The ACNC’s test: a conflict should be disclosed whenever an independent observer could doubt that the person is acting in the charity’s best interests. More in Conflicts of interest.
Ensure the financial affairs are managed responsibly
As a minimum, good processes to prevent problems and manage money responsibly, including reading the financial statements and having a way to ask questions about anything not understood.
Not allow the charity to operate while insolvent
Where a Responsible Person reasonably suspects the charity cannot pay all its debts when they fall due, the ACNC says they should take all reasonable steps to stop it taking on more debt. Separately, it says the governing body should check the charity’s financial position at regular intervals and make sure there is enough money to pay for its activities.
Among the steps the ACNC suggests for meeting the standard are setting the duties out in a letter of appointment or a board charter, offering regular information or training, encouraging people to prepare for and take part in meetings, and acting when a Responsible Person is not meeting the duties. It publishes a template letter of appointment for the purpose.
3.3
Before the seat: Governance Standard 4
Standard 4 asks the charity to take reasonable steps to be satisfied that each Responsible Person is not disqualified from managing a corporation under the Corporations Act, or disqualified by the ACNC Commissioner within the previous 12 months. It applies even when the charity is not a company. The ACNC says a charity will likely meet the first part of the standard if, for each existing or potential Responsible Person, it:
- understands how a person becomes disqualified
- searches the ASIC Disqualified Persons Register
- searches the ACNC Register of Disqualified Persons (the ACNC says it has not disqualified anyone at this time)
- “requires each of its Responsible People to sign a declaration confirming that they are not disqualified and that they understand what it means to be disqualified.”
If a person turns out to be disqualified, or refuses to sign, the ACNC says the charity must take reasonable steps to remove them: first by asking them to resign, then through the process in its governing document. Where that fails, the ACNC asks the charity to write and explain.
3.4
Where other laws already apply
The ACNC notes that Responsible People may already carry duties under other laws. Incorporated associations legislation in the states and territories has equivalent duties, and a charity whose Responsible People meet them meets Standard 5. For a charity that is a company, the Governance Standards replace most director duty requirements under the Corporations Act, though some criminal offences under that Act and similar common-law duties continue to apply. Trustees generally have higher duties.
Directors of a charity that is a company, a registered Australian body or an Aboriginal and Torres Strait Islander corporation also need a director ID. The Governance Standards do not apply to Basic Religious Charities.
3.5
Telling the ACNC, and how it acts
A charity must notify the ACNC when a Responsible Person is appointed or leaves, through the ACNC Charity Portal, and for every Responsible Person, not only office bearers. Only each person’s name and position appear on the public Charity Register.
The ACNC says it expects most charities to comply and focuses on serious or deliberate breaches of the Governance Standards, such as redirecting money to purposes that are not charitable, failing to disclose serious conflicts of interest, or gross negligence with finances. Its responses can include warnings or directions, and revoking registration, which costs a charity access to certain government funding, exemptions, concessions and benefits. In rare situations, it may suspend or remove a Responsible Person.
Next item4. Conflicts of interest: declared, recorded, stepped away from