Item 4 of 6 · back to the agenda
Conflicts of interest: declared, recorded, stepped away from
The ACNC’s conflicts tool defines a conflict of interest as “when a person’s personal interests conflict with their responsibility to act in the best interests of the charity.” Company law, charity regulation and the NSW and Victorian associations Acts all expect a board or committee member to disclose one, and the ACNC and both state regulators also expect the member to stay out of the discussion and the vote, with exceptions set out below.
General information, not legal advice. The official places to check are the ACNC’s guide Managing conflicts of interest, ASIC’s obligations of company officeholders, and the associations regulator in the organisation’s own state.
4.1
Actual, potential, perceived
The ACNC sorts conflicts into three types, and says a conflict may be financial or non-financial. Its examples are written for charities.
| Type | The ACNC’s description | The ACNC’s example |
|---|---|---|
| Actual | Being influenced by a conflicting interest. | The charity is weighing a grant to a kindergarten the board member’s child attends. |
| Potential | Could be influenced by a conflicting interest. | Holding positions at two charities that may one day apply for the same grant. |
| Perceived | Could appear to be influenced by a conflicting interest. | Reviewing quotes when one provider is a sibling’s employer. |
“Personal interests” reach past the individual, to the interests of family, friends and other organisations the person is involved with, and a conflict can also be between two duties, such as duties to two charities. The ACNC offers one question to test any situation:
“Would a reasonable person (properly informed about the nature of your personal interests) believe you might be influenced by your personal interests when making decisions on behalf of the charity?”
4.2
What each rulebook asks
Four regulators, four slightly different rules. Each row is taken from that regulator’s own page; an organisation’s constitution or rules can add more.
| Board | Disclose | The discussion and the vote | The record |
|---|---|---|---|
| Company director (ASIC) | Disclose any material personal interests. | When making a decision affecting the company, not have a material personal interest in it, and put the company’s interests first. | Not covered on ASIC’s summary page. |
| Charity Responsible Person (ACNC) | Generally to the other Responsible People; to the members if there is only one Responsible Person or all of them are conflicted. | Should not discuss or vote on the matter. | The ACNC calls it prudent to record conflicts in writing, most often in a register of interests, and suggests asking for a conflict raised at a meeting to be minuted. |
| NSW committee member (NSW Fair Trading) | A direct or indirect interest that conflicts with their duties, disclosed at the meeting as soon as possible after becoming aware of it. | Unless the committee decides otherwise, not present while the matter is discussed and no part in the decision. | In the committee meeting minutes and the Register of Disclosed Interests. |
| Victorian committee member (Consumer Affairs Victoria) | A material personal interest, disclosed to the committee as soon as the member is aware of it; all members are told of it at the next general meeting. | Not present while the matter is discussed, and no vote, except where the interest arises only from being employed by the association, from a membership class the association exists to benefit, or is shared with all or most members. | In the committee meeting minutes. |
NSW Fair Trading adds that there are substantial penalties for breaching the disclosure provisions, and that any member may inspect the record of disclosures for a fee set by the committee of no more than $6.
4.3
Once a conflict is declared
The ACNC describes the duty to manage a conflict as shared between the person who has it and the rest of the board, and sets out a process in its guide Managing conflicts of interest that “may be something like” this:
- The memberIdentifies that they have a conflict of interest.
- The memberNotifies the charity, in line with its policy.
- The othersDecide the appropriate action to address it.
- The othersTell the conflicted member the outcome.
The ACNC calls staying out of the room for the matter, and out of the vote, the lowest-risk approach. It says other approaches may be appropriate if properly justified and documented: limited participation, such as giving factual information only, where a conflict is minor or perceived rather than actual, or a board-approved waiver where a conflict is judged manageable and not detrimental to the charity. Either should be approved by board members who are not conflicted, clearly recorded, and consistent with the charity’s governing documents and policy.
One of the ACNC’s own case studies shows the line. A board member with a training consultancy disclosed it before joining. When the charity later weighed training packages, including his firm’s, it met Standard 5 if he left the room and took no part in choosing; it did not if he joined the discussion and voted.
4.4
The register of interests
The ACNC describes a register of interests as a record of the relevant interests the charity’s Responsible People hold, and of any steps taken to manage them. It says one may include some or all of:
- the Responsible Person’s name
- the date of their appointment
- current and previous paid work
- current and former trusteeships and directorships
- current and former membership of other organisations
- relevant interests of family or friends
- how those interests relate to the organisation’s activities
- the date of disclosure
- steps taken to prevent or manage the conflict.
The ACNC also suggests making conflicts a regular agenda item, because a conflict may not be apparent until a motion has been proposed, and reviewing the register before every meeting. It publishes a conflict of interest policy template and a register of interests template.
Next item5. Running a meeting: notice, quorum, resolutions, minutes