Positions in a company limited by guarantee
This section provides legal information about holding a position in a Victorian community organisation that is a company limited by guarantee. For more information about companies limited by guarantee see Getting started > Choosing the right legal structure and Getting started > Setting up a company limited by guarantee.
You may have just joined the board of a not-for-profit company as a director or you may be a director of a company limited by guarantee and considering taking on an office (like Treasurer or Chairperson). It's great to get involved, and, of course, many organisations wouldn't be able to continue their great work unless people took on these roles!
Before you start in on your new role you should make sure you are aware of some of the main legal obligations that come with being a director or officer on a board of a company limited by guarantee. With a basic understanding of your legal obligations, you will be ready and well prepared to take on an active and important role in your community organisation.
The information on this website is intended as a guide only, and is not legal advice. If you or your organisation has a specific legal problem, you should seek advice before making a decision about what to do.
Who are the 'directors' and 'officers' of a company limited by guarantee?
The Corporations Act 2001 (Cth) defines an 'officer' of a company limited by guarantee as:
- a director or secretary of the corporation;
- a person who makes or helps to make decisions that affect the whole or a substantial part of the organisation or who may significantly affect the company’s financial standing;
- any receiver, administrator, liquidator, or trustee of the company.
In general, a 'director' is defined to mean anyone:
- appointed as a director or an alternate director; or
- not validly appointed as a director but acting in that position anyway or with whose wishes or instruction the directors are accustomed to act.
Your company may use different names for its directors. These may include a managing director, alternate director, nominee director, executive and non-executive director, and many others. No matter what name is used, all directors and officers of a company must comply with certain legal duties, which are explained further below.
What is a 'board of directors'?
The Corporations Act 2001(Cth) requires that a company limited by guarantee be set up with at least three directors and at least one secretary. Many companies will have a constitution which provides for more than three directors. The group of directors in a company is known as the 'board of directors'.
The board of directors is responsible for governing and overseeing the affairs of a company. Generally it is the board’s responsibility to identify an organisation’s strategic direction and goals. This is different to the role of the management of a company (that is, employees of the company like any Executive Director or CEO and other management staff) who have responsibility for the day to day decision-making and running of a company. For more information about this issue see Running the organisation > Governance Issues.
While the Corporations Act includes some provisions about the board of directors of a company, it is a company's constitution which will set out the details of its board, including its composition, powers and duties of the directors, how they are to be elected, removed and remunerated (if at all), among other matters. If a company has not adopted a constitution, the 'Replaceable Rules' in the Corporations Actwill apply. For more information about the constitution of a company limited by guarantee, see Getting started > Setting up a company limited by guarantee.
What is the role of a 'secretary' in a company limited by guarantee?
The Corporations Act 2001 (Cth) provides that a company limited by guarantee must have at least one secretary. The company secretary may or may not also hold the position of a director of a company.
In general, the company secretary's role is to understand the governance requirements of a company, manage the business of the board, and ensure that the company is complying with its legal and regulatory obligations.
The Corporations Act sets out many of the duties of the secretary (refer section 188 of the Act for a summary). In general, the secretary has a role in ensuring that the Australian Securities and Investments Commission (ASIC) is provided with up to date information about the company.
The Corporations Act is a complex piece of legislation and the role of the company secretary is a specialised one. We have included links to resources about the role of company secretary in the Related Resources section below.
Can anyone become a director or secretary of a company limited by guarantee?
No. The Corporations Act sets out eligibility requirements for people who want to be a director or secretary (relating to age, residence and certain matters like bankruptcy which may disqualify a person from becoming a director). A company's constitution may set out additional requirements.
Your organisation should be aware that there may be requirements for directors of a not-for-profit company set out in other legislation. For example, taxation legislation may require directors of your organisation to be 'responsible people' (requiring certain qualifications) so that your organisation can be eligible for tax concessions.
Fact sheet: Duties of Directors of a company limited by guarantee
The law requires directors to meet certain standards of conduct while managing the affairs of the company. If you are (or are considering becoming) a director of a not-for-profit company, you need to understand what your legal duties are.
The fact sheet below sets out the main legal duties that apply to directors of public companies, such as a company limited by guarantee.
What are some of the other legal obligations directors and officers be aware of?
In addition to the legal duties set out in the fact sheet above, there are a number of other legal obligations directors and officers of a company should be aware of.
There are a number of provisions in the Corporations Act which apply to directors. These include provisions relating to the holding of an Annual General Meeting, providing ASIC with financial information, and providing ASIC with updated details of the names and addresses of directors and the registered address of the company, among many others. Your company secretary may have responsibility for organising many of these matters but as a director you should be aware of these Corporations Act requirements.
Under the Occupational Health and Safety Act 2004 (Vic), 'officers' of an incorporated body can be personally liable for breaches of the Act. These provisions apply to both directors and officers of a company limited by guarantee, although volunteer directors and officers are exempted from these provisions. For further information about occupational health and safety laws, see Running the Organisation > Occupational Health and Safety.
This site contains details of many of the laws relating to the running of community organisations in Victoria, which directors of a company should be aware of. And, of course, normal criminal and other laws that apply to the public in Victoria can apply to directors of companies limited by guarantee.
Related legislation
-
This is a link to the legislation that governs companies limited by guarantee in Australia. The main provisions in relation to directors and company secretaries are set out in Chapter 2D of the Act.
-
This is a link to the legislation which sets out the laws relating to workplace health and safety in Victoria.
Related links - Role of the Board
-
This link is to an AICD fact sheet providing information on the role of the board of directors.
-
This link is to an AICD fact sheet that sets out information on the role of the board of directors. It is written for all types of companies but relevant to not-for-profit companies.
-
The CSA's good governance guide provides information about board structure and responsibilities.
-
This section of the Our Community website provides information about boards of community organisations.
Related links - Role and responsibilities of directors
-
This page on the ASIC website sets out some of the basis duties of directors of a company. It is not written specifically for not-for-profit companies but is useful as a general guide.
-
This section of the AICD website includes a range of fact sheets that provide information on the role, responsibilities and different types of directors. The fact sheets are written for all types of companies but are relevant to not-for-profit companies.
-
This section of the AICD website sets out a range of frequently asked legal or policy questions about directors.
Related links - Role and responsibilities of company secretary
-
This AICS fact sheet provides information about the role of a company secretary. It has not been written for not-for-profit organisations but is a useful guide to the main responsibilities and duties.
-
This page of the CSA's website has resources for company secretaries of not-for-profit organisations.
-
This CSA good governance guide sets out the roles and responsibilities of a company secretary.