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Management and Administration

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The responsibilities of directors of co-operatives are similar to those of directors of companies under the Corporations Act.


Directors

Election
With certain exceptions, the directors are to be elected in the manner specified in the rules of the co-operative. The model rules provide for election of directors at an annual general meeting.

If authorised by the rules, the board may appoint a person to fill a casual vacancy until the next annual general meeting. (s207)

Qualification
A co-operative must have at least three directors (not counting deputy directors), with at least two ordinarily residing in Australia.

A person is not qualified to be a director unless either a member of the co-operative (or a representative of a body corporate member) or an independent director. An independent director may be an employee of the co-operative or a person qualified by the rules to be a director.

A majority of directors must be member directors, however, the rules may specify a greater number than a majority. (s208)

The persons disqualified from acting as a director, or directly or indirectly taking part in or being concerned with the management of a co-operative, include:



Notice of appointment
Notice of appointment or cessation as a director, principal executive officer or secretary of a co-operative, or of any subsidiary, must be given to CBS within 28 days of it occurring. (s243, Reg 16 and Form 14)

Remuneration
A director's remuneration must be approved at a general meeting of the co-operative. (s224)

Meetings of the board

Meetings of the board of directors must be held at least once every three months.

The quorum is 50 per cent of the number of directors or such greater number as is specified in the rules. However, the number of member directors must exceed the number of independent directors by at least one, or the greater number if provided for in the rules. (s210)

Secretary

The board of a co-operative must appoint a secretary who must be an adult who ordinarily lives in Australia. (s214A)

Fiduciary duties of officers

Must act honestly
An officer of a co-operative must at all times act honestly in the exercise of powers and the discharge of the duties. This includes a director or secretary or other person who takes part in management. (S 216)

Standard of care and diligence
An officer must exercise the degree of care and diligence that a reasonable person in a like position in a co-operative would exercise in the co-operative's circumstances. (S 217)

Improper use of information or position
An officer or employee, or former officer or employee, or a member of a sub-committee to which the board has delegated any of its functions must not make improper use of information acquired by reason of their position to gain, directly or indirectly, an advantage for the person or any other person or to cause detriment to the co-operative.

An officer or employee or a member of a sub-committee of the board must not make improper use of their position to gain, directly or indirectly, an advantage for the person or any other person or to cause detriment to the co-operative. (S 218)

Indemnification of officers and auditors

Section 222 contains a general prohibition against any provision in the rules or a contract with a co-operative (except a contract of insurance), which purport to indemnify an officer or auditor against negligence or breach of duty or of trust in relation to the co-operative.

This does not apply in relation to a co-operative indemnifying an officer or auditor against any liability in defending any proceedings where judgment is given in the person's favour or acquittal occurs, or where the court grants relief in connection with any application concerning such proceedings.

Officer includes an employee and a person who under the rules is able to give directions regarding the business of the co-operative.

The determination to insure against liability for neglect or default is a matter for a co-operative to consider having regard to its particular activities and the risk that flows from those activities.

Financial accommodation

Officers other than directors
An officer who is not a director must not obtain financial accommodation from the co-operative, including through certain associated entities or trusts, other than:


Directors and associates
A director, or a person the co-operative knows or should reasonably know is an associate of a director, is prohibited from obtaining financial accommodation from the co-operative unless approved by a majority of at least two-thirds of directors present and voting on the matter at a meeting of the board at which a quorum was present, and:

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