What is liability?
The Management Committee is ultimately accountable for the organisation. They are therefore responsible or liable for the consequences of actions taken or not taken by the organisation, its staff or volunteers and other Management Committee members.
What this means is that the Management Committee may be held responsible for making good any loss or damage (financial or otherwise) to the organisation or to third parties and may be held personally responsible, where relevant.
However, it's important to keep this in perspective. Very few Management Committee members who act honestly and diligently in carrying out their responsibilities suffer any financial loss as a result of their involvement.
Nevertheless, it is important for all members to be aware of the extent of their potential legal liabilities and how their personal risks can be minimized.
Where do liabilities arise?
The Management Committee may have legal liabilities arising from:
- Contracts (e.g. with suppliers, funders, staff or landlords) More on this!;
- Statutory obligations (i.e. as dictated by legislation relating to health & safety, child protection, staff conditions etc) More on this!; and
- Duty of Care (i.e. the responsibility to take reasonable steps to ensure that others do not suffer loss or damage through what you do or fail to do) More on this!
Should the organisation, its staff, volunteers or Management Committee members fail to meet their obligations in any of these areas, the Management Committee may be held to account by any external individual or body.
Are you likely to be held personally liable?
Click here for a quick self-assessment questionnaire.
In many cases, the financial implications of this liability will be carried by the organisation, but in others Management Committee members can be held individually responsible and obliged to cover any loss from their own resources.
The key factors in this are:
1. The legal structure of the organisation
Management Committee members of incorporated organisations (e.g. a company limited by guarantee) have greater protection against personal financial loss.
2. Whether the Management Committee members acted reasonably, honestly and with due diligence
If the Management Committee or its members have not acted responsibly, they can potentially be held individually and collectively responsible, regardless of the legal structure or any insurance provisions.