Directors play a key leadership role in PBCs. Directors are the big thinkers and planners, their role is to make the tough decisions and work hard to make sure that the PBC functions well and is sustainable into the future.
The duties required of directors and other officers in a PBC are set out in the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).
Who is a director?
Directors sit on the governing board of a PBC and it is their role to make decisions for the whole corporation and its stakeholders. Directors are often appointed by members of a PBC and how they are chosen must be written in a PBC’s rule book. A PBC’s rule book will say how directors are chosen.
What are the legal duties of directors?
The directors have legal duties set out in the CATSI Act. These duties are also explained on the Office of the Registrar of Indigenous Corporations (ORIC) website.
There are five legal duties for directors:
- Duty of care and diligence - (CATSI Act: section 265-1)
Directors of a PBC must act with a high level of care and diligence, take their responsibility seriously and act in the interest of their PBC.
- Duty of good faith - (CATSI Act: section 265-5)
Directors must carry out their duties in good faith and in the best interests of their PBC as a whole.
- Duty to NOT improperly use position or information - (CATSI Act: sections 265-10 and 265-15)
Directors must not misuse their position, or use information they have learnt from their position, to gain an advantages for themselves, someone else or to cause harm to their PBC.
- Duty to disclose material personal interests - (CATSI Act: section 268-1)
Directors have a duty to notify other directors of personal interest when conflict arises relating to PBC business.
- Duty to NOT trade while insolvent - (CATSI Act: section 531-1)
Directors must not allow their PBC to continue trading if it doesn’t have enough money to pay all its bills when they are due.
If directors breach any of these legal duties there can be civil and criminal consequences depending on the seriousness of the breach. For a more visual approach to director or board member's duties see this video.
Directors make the big decisions about a PBC’s business. They meet and discuss its strategic goals, plan business projects, decide upon partnerships and monitor its financial matters.
At a board meetings, directors make decisions about things like:
- corporate business issues (such as logos and spellings)
- membership criteria and membership applications
- project partnerships (such as with universities or local councils)
- financial delegation for events and projects
- appointment of working groups such as cultural heritage
- Registered Aboriginal Parties (RAP)s and cultural heritage issues
- negotiated settlements
- removal of directors.
Other larger decisions about land, water and culture such as negotiated agreements with the state government, may be made by all of a PBC’s members at the annual general meeting (AGM) or other special meetings.
What makes a good director?
Directors are expected to perform their duties in the best interest of their PBC and its members. They should work together with the other directors of a PBC to control the corporation’s business. A PBC’s rule book outlines the powers and functions of its directors.
A director has a common law right to inspect documents of the corporation, if required, in order to assess the corporation’s performance.
A good director must:
- know what the corporation is doing
- run, administer and be involved in directors' meetings
- find out for themselves if any activities their PBC is doing will affect its business performance, especially if those activities involve a substantial amount of the PBC’s money
- seek professional advice even from outside the PBC when required to make informed decisions
- during meetings ask managers and staff how the PBC is going.
'Remember, only be a director if you are willing to put in the effort.' ORIC
When does a director have a conflict of interest?
Directors have the difficult business of balancing obligations to family with doing the right thing for all members of their PBC. For Indigenous peoples this is often a very difficult cultural issue.
Directors must make decisions that are in the best interests of all members of a PBC and they cannot make decisions that might only benefit themselves and/or other family members and friends.
For example, if a PBC decided to contract a local construction business for some work but this business was also owned by a director or the director’s family, this would be a conflict of interest for the director.
Directors and members are often closely related so conflicts of interest should be handled carefully. Even if a person only thinks or perceives that there is a conflict of interest, this is the same as if there is a conflict of interest.
A director making a decision involving the possibility of conflict of interest must:
- let all directors know about the conflict
- declare the details of the interest in a board meeting
- record the potential conflict of interest in the minutes
- a director who has a conflict of interest must then leave the meeting and NOT:
- be present or involved in any discussion relating to the conflict (whether inside or outside the meeting)
- vote on the issue.
Removal of directors
Directors have a responsibility to make effective and informed decisions for the good of the whole PBC, its members and other stake holders.
Directors or members of a PBC have the power to remove a director if they are not performing their duties in the best interest of the PBC. If a director is removed from their position on the board, they remain a member of PBC.