NINE STEPS TO EFFECTIVE GOVERNANCE
CONCEPTS, CHALLENGES, STRUCTURES AND CHANGE
7.
A director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, financial data and other information prepared or supplied, and on professional or expert advice given by certain people (an employee of the company, a professional advisor or expert, and any other director or committee on which the director has not served). In relying on such advice and information, a director must act in good faith and make proper inquiry, if the need for inquiry is indicated by the circumstances. A director cannot rely on advice and information if they have knowledge that such reliance is unwarranted. Courts will examine the information provided by the professional advisor, and the other circumstances of the advice, to determine whether it is appropriate and reasonable for the director to rely on the advice from an external advisor.
8.
A director of a company must, as soon as he or she becomes aware that they are interested in a transaction or proposed transaction with the company, ensure it is entered in the interests register.
9.
Without the informed consent of the organisation, directors must not place themselves in a position in which their personal interest or duties to other persons or circumstances are likely to conflict with their duties to the organisation. If a director of a company has information in their capacity as a director or employee of the company that would not otherwise be available to them, they must not disclose that information to any person, or make use of or act on the information, except: (a) for the purposes of the company; or (b) as required by law.
A board member’s moral duties relate to those matters that, while not prescribed in law, it is still incumbent on them to exercise in the interest of the organisation’s reputation, its responsibility to its members and other stakeholders, and that would, under normal circumstances, be expected to be carried out in an acceptable manner.
Liabilities All directors are equally liable for actions and decisions taken by the board. Nonattendance at a meeting at which a decision is made doesn’t absolve a director from shared responsibility, accountability or liability.
Directors’ indemnity Under certain circumstances, directors can be held liable for the organisation’s financial failure or its failure to meet certain legal requirements. A directors’ and officers’ liability insurance policy protects the personal liability of board members. However, it is only valid where the director/s concerned acted with honest intent. Personal liability insurance also usually contains similar exclusions.
Each board should seek direct legal advice to ensure it has a clear understanding of its legal and constitutional responsibilities and liabilities.
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