Agony Uncle: How to ditch a dodgy board member

Question from 'Concerned'

I am writing for advice about a situation in which a director on our board made a query about his membership to our membership officer, and it was discovered that the director is not a member of the company and has not been a member for two and a half years. Our Constitution states:

To be eligible for election to the office of Director of the Company, a person must have been an Ordinary Member of the Company for at least one year prior to nomination. To remain eligible as an elected director of the Company, a director must remain a member of the Company at all material times during his or her elected term.

This would mean that the director was not eligible to stand for election in August 2020, since he would have needed to have been a member since August 2019, which he was not.

Further, the Constitution states, “The office of a board member shall become vacant if a board member: (g) ceases to be a member of the Company.” This would mean that as the director is not a member, the position he was thought to have held is actually vacant.

Can you please advise on what would need to be done, and what implications does the defective appointment have for other directors (are we liable for anything?)

As I understand it the person could rejoin if he is co-opted by the Board. The Constitution states: 

• To be eligible for co-option to the office of Director of the Company pursuant to clause 3.4, a person must be, or must become, a member of the Company. To remain eligible as a co-opted director of the Company, a director must remain a member of the Company at all material times during his or her co-opted term.

In this situation, however, the person has been working at cross purposes to the board, and there have been staff complaints about disrespectful treatment and phone calls. Please advise on the correct procedure if the board does not want the person to continue.

Agony Uncle’s answer

Dear Concerned,

Well, the first point to be made, very strongly, is that the correct procedure to be followed if the board does not want the person to continue is precisely the same as the procedure to be followed if the board does want the person to be continue, only more indulgent. Interpreting your constitution differently for different people because you have ulterior motives, of any kind, would put your decisions at risk if ever legally reviewed (unlikely, I know, but even so; the words “improper purpose” are to be avoided in the mouth of a magistrate). 

The second point to be made, also very strongly, is that before taking any action at all you should look back at why the person in question isn’t a member.  Basically, is it mainly their fault or mainly yours? 

And, in either case, is it a problem of general application?  I have encountered a number of instances where a disputing party looked up from the constitution and said “Aha, we have him now! He didn’t fill out the prescribed form!” only for subsequent inquiry to reveal that there was no such form and thus not only was the rogue in question dismembered but so was every other single member inducted since the organisation was established, meaning that the only way to correct the problem was to call back the people who attended the original meeting setting up the organisation in, as it might be, 1991, a remedy which creates its own difficulties.

If it was their fault, I’d say that you wouldn’t have to appoint them as a casual vacancy.  If there’s any chance that it is in fact your fault, then I probably would (provided they agreed to become a member); their election by the AGM should mean something. I can’t see that you’re liable for anything either way.

If the behaviour of this person continues to be objectionable, then expel them under the section of the constitution that deals with cessation of membership (or talk them round).

Postscript

Following this exchange of emails, “concerned” then contacted me by phone, and matters were clarified. Yes, it was a problem of general application – and not one that applied only to their organisation, even.

When the inquirer said, “It was discovered that the director is not a member of the company and has not been a member for two and a half years”, what they really meant was, “The director hasn’t paid his sub for two and a half years”. That’s the way a large number of organisations work out who’s a member: are they financial? But it’s generally not the way the Act and the constitution do it. The question they ask is quite different: “Are they on the membership register?”

In the present case, the answer (shared, I have to say, with a large number of not-for-profit groups) was, “Membership register? What membership register?”

What the organisation had was a list on a complicated spreadsheet saying who got sent papers for what, with the ones who had paid their subscriptions ticked. That’s probably not a membership list in the terms of the Act. This guy, for example, may not have noticed that he hadn’t paid his dues because the club had kept sending him the papers anyway, because he was on a different list.

At this stage I was rather worried that this, like many others, would be a case where the organisation legally had no members at all. But the good news was that the club had been doing what many NFPs don’t – that is, all membership applications were approved by the board and noted in the minutes. You could reconstruct a Members’ Register by going through old minutes.

But then what about the members who’d dropped out, resigned, or not paid their dues? The register was going to feature a lot of absentees. Surely they could be culled? Yes, but…. The constitution said that people ceased to be members when they were removed from the membership list, and while the board approved new members it had never formally removed any old ones.

Failing to pay your dues didn’t cut it. The constitution in fact said that the board had the discretion to waive the fees requirement, so that merely not having paid wasn’t conclusive evidence that your membership had actually lapsed.

My advice ended up being in two stages. First, for heaven’s sake get together a members’ register with all the names from old minutes (which would, of course, include the board member who hadn’t paid their fees), get a separate list of the people who’d resigned or gone unfinancial, and at the next meeting of the board approve both of them, and approve subtracting the latter from the former, leaving you with a legally defensible list.

Second, as “Concerned” still wanted to get the person off the board, use the provision in the constitution that dealt with getting people off the board. This had the disadvantage that it could well involve nasty personal scenes, rather than the desired “Nothing to do with me, mate, I don’t make the rules,” automatic action, but in my experience nasty personal scenes are pretty well inevitable anyway however you play it.

At this point the problem became the familiar “Can you get a two-thirds majority to vote this person out, given their friends on the board?” That was a problem I couldn’t answer, but at least we’d come to the only question that in the end mattered: who had the numbers?

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