Reforming the Not-For-Profits Statutes – Governance Questions

My last article closed with the assertation that of all the questions posed in the Law Commission Issues Paper June, those covered in this article (relating to constitutional issues) were probably of most regular practical significance for many societies and those that advise them.   The questions discussed in this article are almost as significant. Question 18:Do you agree that the new Act should provide a ‘code’ of duties that committee members must observe in their decisions? Question 19:If so, what duties ought to be included in the code? Question 20:In what respects might the Companies Act obligations need to be altered if included in a new Incorporated Societies Act? The problem of committees becoming laws unto themselves, acting dictatorially, and becoming a clique remote from many members is common, but that does not highlight a failure of the legislation.  Rather it is a consequence of factors such as member apathy, lack of understanding of good governance practice, and failures of accountability and transparency. It is not possible to legislate for good behaviour, but some form of code might be useful if it is combined with some improved dispute resolution procedure (discussed below and in my next article).  A company director’s obligations are set out in sections 131-137, Companies Act, and include requirements to act in good faith and in the best interests of the company, to use powers for a proper purpose, not act in contravention of the Companies Act or the company’s constitution, not run the company recklessly or at substantial risk to creditors, and to exercise reasonable care, diligence, and skill taking into account the nature of...