Roles and duties of directors and officers
Directors and officers of co-operatives have certain obligations and duties under the Co-operatives National Law (Queensland).
Role of directors
Directors of smaller co-operatives may deal with all aspects of the business, such as:
- buying or leasing premises
- ordering goods and services
- operating retail outlets
- preparing banking, accounts and tax returns.
In larger co-operatives, employees are responsible for the day-to-day business issues, while the directors take on a more administrative role, focusing on:
- planning long-term business and financial strategies
- assessing business performance
- researching new opportunities
- appointing executives
- maintaining good employee relations
- deciding profit distribution among shareholders.
Duties of directors and officers
Acting with due care and diligence
Directors and officers must act with due care, good faith and diligence to carry out their functions in the best interests of the co-operative. They should be:
- adequately informed and seek professional advice if necessary
- active at board meetings in response to directors' proposals and their effects on the co-operative
- aware of management direction.
When it comes to financial and other interests, a director or officer must act honestly.
Theft or misuse of co-operative funds and property by a director or officer is a serious offence, as is making decisions knowing they could be harmful to the co-operative's interests.
Not misusing inside or confidential information
Directors, officers and employees (or former officers and employees) must not use their position to misuse inside or confidential information to harm the co-operative, or to gain an advantage for themselves or someone else.
Disclosing conflicts of interest
Directors must disclose any conflict of interest between their personal interests and duty as a director.
If such a conflict of interest occurs, the director must not be present at a board meeting when the matter is discussed and decided by the board (unless the board agrees otherwise).
Ensuring the co-operative can meet its financial obligations
Directors and officers must ensure the co-operative can meet its financial obligations and prevent insolvent trading.
A director must prevent the co-operative from incurring a debt if they suspect the co-operative is insolvent, or if it would become insolvent by incurring the debt.
Payment and loans
A director should not receive any payment for their services. The exceptions to this are:
- fees, concessions and other benefits approved at a general meeting
- a loan or benefit scheme for a director or their associate approved at a general meeting
- the same type of loan or benefit scheme that any member of the general public can access.
The board must approve a loan or benefit scheme by a two-third majority.
For other officers
All other officers can get loans or benefits from the co-operative, but only if the board approves them. This only needs to be by a simple majority (i.e. more than half of board members). Some co-operatives may create a scheme for this, but the board must still approve it.
This rule also applies to a proprietary company or trust for which the officer is a shareholder, director, trustee or beneficiary.
Financial and other interests
You may need to enter into contracts with outside organisations. A director must declare if they have a conflict of interest before you enter into a contract. They might also be involved with the other organisation. For example, if they held a part ownership of a company that supplied parts to you.
They must notify the board about:
- any direct or indirect interest
- the nature and extent of this interest.
The director must notify the board:
- by writing a statement that they have an interest—financial or otherwise—in the contract
- in person at the first board meeting to discuss the contract.
A director who develops an interest after this point should advise the board at their next meeting. For instance, they may have bought shares in that company.
They don’t have to declare an interest in contracts if:
- they are buying goods and services from the co-operative
- they are selling agricultural products or livestock to the co-operative
- the co-operative is leasing land to the director
- your rules permit this type of interest.
A management contract is when your board appoints someone else to manage your business. This could be:
- signing a contract
- making any other type of arrangement.
You must hold a special resolution to approve this contract first. Otherwise, it becomes void.
Learn more about the role of the board of directors for a co-operative.