Charities and not-for-profit entities have turnover and change just as for-profit companies experience. However, as many charities are companies limited by the liability of their members, the process to change leadership is different than what for-profit companies may experience.
When changing leadership or board members for your charity, then first place to look is your constitution or any rules or by-laws your organisation has, along with checking any relevant legislation. These documents will assist in listing the process to follow and rules about who might be eligible to sit in leadership positions.
In addition to organisation rules, the Australian Charities and Not-for-Profits Commission (ACNC) has further requirements and legal obligations to meet before someone may sit on a charity board. ACNC requires that decision makers of your organisation, whether board, committee members, or trustees be ‘Responsible People’.
Responsible People must be aware of the expectations of the role which includes legal obligations. The ACNC’s Governance Standards require charities to take reasonable steps to make sure certain duties apply to Responsible People. These include:
- to act with reasonable care and diligence
- to act honestly and fairly in the best interests of the charity and for its charitable purposes
- not to misuse their position or information they gain as a Responsible Person
- to disclose conflicts of interest
- to ensure that the financial affairs of the charity are managed responsibly, and
- not to allow the charity to operate while it is insolvent.
To help ensure your organisation members understand their obligations, it is a good idea to give board or committee members a ‘letter of appointment’ which should outline expectations (including key duties and responsibilities) and any other relevant information to the role.
Your organisation must you check that a proposed Responsible Person is not disqualified from managing a corporation under the Corporations Act 2001 (Cth) (the Corporations Act) or from being a Responsible Person by the ACNC Commissioner within the previous 12 months prior to appointing the person to your board or committee.
When you appoint or elect a new board or committee member who is deemed a ‘Responsible Person’, you must notify the ACNC. You may also need to notify your incorporating regulator. If this is done in a timely manner, you will avoid any fees for noncompliance.
Many charities will look to their membership for qualified persons who know the organisation, but if you need additional resources to search for board members or ‘Responsible Persons’, ACNC provides website information for sites where you can post board vacancies:
- OurCommunity’s Board Matching Service
- Pro Bono Australia’s Volunteer Match
- Volunteering Australia’s GoVolunteer.
If you have questions about adding, replacing, or removing board members in your charity, contact us today.
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