March 2017

Constitutional Matters (Opinion)

Had a look at your constitution lately? This is the document that lays down how your organisation has to be run, especially how officers get elected, whether or not you have an AGM and what happens there, what happens when you wind up etc. You may know it under the name ‘Rules’ or it is part of your ‘Trust Deed’.

Often it contains a lot of jargon and people are tempted to put it in the ‘too hard’ box. However, a constitution is binding on the organisation, and breaching it is illegal. Anecdotal evidence from our clients and the participants of my not-for-profit class at Hagley suggests that a large number of organisation, perhaps most, do not follow their constitution in all respects.

Legally speaking, the officers of an organisation, whether it is for-profit or not-for-profit, have a fiduciary duty to run the organisation as it is laid down in the constitution or described in law. Failing this fiduciary duty is an offense, and potentially a disgruntled member or ex-member (or investor in a business environment) could take you to Court over it. This happens only very rarely, if at all, in a not-for-profit context, but this doesn’t make it acceptable.

Constitutions, especially old ones, often contain some fairly tedious clauses that a committee or Board may disregard for various reasons. This is problematic for a number of reasons, one of them being the difficulty of who gets to decide which rules can be disregarded and which can’t. Once you suspend one rule without the authority to do so, all others are fair game too. Where the procedures and rules laid down in the constitution are not followed, the organisation is wide open to a ‘hostile’ takeover, i.e. a group pf people, perhaps even just a single individual, wanting to run the organisation with a different agenda in mind. This happens quite a lot – this kind of conflict is quite common in not-for-profit groups (and also in businesses, although often for different reasons).

The founders of an organisation write a constitution to ensure that the organisation is run according to the purpose for which it was founded, especially after they themselves have left. The procedures around appointment of committee or Board members, or their removal, AGMs and all the other aspects of a constitution are the safeguards to ensure that this happens. Committees or Boards have wide powers, but they can only use those powers within the limits set by the constitution, and especially to further the purpose laid down in it. They do not have free rein.

Sometimes an organisation outgrows its constitution or even its purpose. However, who gets to decide whether an organisation should follow a different path to the one originally laid down? This can only be legally achieved by following the procedure laid down in the constitution for changing its own rules. These are usually, for good reason, quite strict and require the approval of generally significant majorities of the membership or stakeholders.

In general, it is the president’s (or chair’s) role to ensure that the organisation operates within its constitution, and the secretary’s role to implement procedures such as notifications of meetings, minute-taking etc.

Happy governing.