Mitigate Risks
In short, a functioning Board will meet their legal obligations and oversee the mitigation of risks. To do this, all members must have a good understanding of the organisations’ objectives and rules, financial status, legal status and legal duties.
Legal Status
In Australia, a not-for-profit is either unincorporated or incorporated. If it incorporated is has chosen a legal structure and the registered group is recognised as an entity separate from its members.
The incorporated group has legal rights and responsibilities, it can sue or be sued and enter into contracts or merge with other incorporated groups.
In an incorporated group, an individual Board member can still be personally sued for losses and damages if they act illegally or negligently. They can be sued by a regulator, someone who is owed money or even by the Board itself. It is rare but it does happen. Penalties might include fines, compensation, disqualification or imprisonment. The risk of this can be mitigated by understanding your organisation’s legal status and your legal duties as a Board member.
Extend Your Learning
ICDA have developed these 10 tips to keep your Board on the straight and narrow. They are a great way to begin making sure you and your Board are fulfilling your regulatory responsibilities.
A not-for-profit can also have the status of a registered charity and have access to some tax concessions, exemptions and endorsements that are only available to not-for-profits and charities.
You can find out the legal status of your organisation by searching on ABN Lookup. This is the publicly available information provided by businesses when they apply for an ABN.
This tool will allow you to determine if your organisation is incorporated or unincorporated and if it is registered as a charity with the ACNC.
Your legal status will inform the key legal duties of your organisation’s Board.
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The AICD has developed a factsheet regarding the risk management role of the Board. It includes a list of the types of risks that Board members are expected to mitigate.
