Duties of the governing body

Co-operatives, regardless of legal form, will have a governing body comprised of those individuals appointed to manage the affairs of the co-operative. Often referred to as the board, directors, or management committee, it is important that these individuals are aware of their duties and responsibilities in law.

What are the legal duties of directors?

  • Duty to act within powers

A director of a co-operative must always act in accordance with the powers granted to directors in the co-operative's governing document.

  •  Duty to promote the success of the co-operative

A director must act in the way s/he considers, in good faith, would be most likely to promote the success of the co-operative for the benefit of its members as a whole.

  • Duty to exercise independent judgement

A director must exercise independent judgment. This duty requires a director to act in what s/he considers to be in the interests of the co-operative and not someone else. This duty is not infringed if s/he acts in a way authorised by the co-operative's governing document or with an agreement entered into by the co-operative that restricts the directors from exercising this discretion in the future.

  • Duty to exercise reasonable care, skill and diligence

A director of a co-operative must exercise reasonable care, skill and diligence. An assessment as to whether a director has carried out this duty adequately will consider the knowledge, skill and experience the director has and measure this against the standards expected of another person carrying out similar duties to the director in question.

  • Duty to avoid conflicts of interest

A director must avoid a situation in which s/he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the co-operative.

  • Duty not to accept benefits from third parties

A director must not accept any benefit from a third party if this benefit is connected with his/her carrying out, or not carrying out, the duties associated with him/her being a director.

  • Duty to declare interest in proposed transactions or arrangements with the co-operative

If a director has directly or indirectly an interest in a proposed transaction or arrangement with the co-operative s/he must, before the co-operative enters into the transaction or arrangement, declare the nature and extent of that interest to the other directors.

  • Duty to declare an interest in existing transactions or arrangements

A director must declare an interest to the directors in any transaction or arrangement that has been entered into by the co-operative.  However, if a director has already declared an interest before the co-operative entered into such a transaction or arrangement s/he does not have to declare it again.  The declaration must be made at a meeting of the directors, by notice in writing or through a general notice. If at any time, the declaration of interest becomes inaccurate, the director must make a further declaration.

A director is not required to declare an interest if: it cannot reasonably be regarded as likely to give rise to a conflict, the directors are already aware of the conflict or it concerns a director’s service contract that had been considered at a Board meeting.

  • Duty to declare interest in proposed transactions or arrangements with the co-operative

A director has a general duty to avoid conflicts of interest and a duty to declare interests in proposed transactions or arrangements with the co-operative. 

  • Duty to declare an interest in existing transactions or arrangements

Non-conflicted directors can authorise a conflict, provided that the co-operative's governing document permits such an authorisation in relation to the specific transaction or arrangement.

For more information on the roles and responsibilities of directors and chairs of co-operatives see our in-depth guides.

For a broader overview see our Simply Governance guide for more information.