In Australia, directors, regardless of whether they serve a commercial or charitable company, or whether they are volunteers, have similar legal responsibilities and exposure to personal liability for unintentional mistakes. Indeed, the largest ever legal claim in Australia for a breach of directors’ duties - 97 million dollars, equivalent to almost 200 million dollars today - involved a volunteer director of a not-for-profit or charitable company. (Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1) Recently, volunteer directors’ conduct and liability for breaches of the duty of care and skill were considered again in Australian Securities and Investments Commission v Mitchell (No 2) [2020] FCA 1098 and Australian Securities and Investments Commissions v Mitchell (No 3) [2020] FCA 1604. This begs the question whether directors, serving in the charity sector, volunteering their time and expertise for the public benefit, should be held to the same standards of conduct as their fee-earning corporate counterparts? Or should volunteer charity directors, whose companies often serve the most vulnerable and disadvantaged sectors of the community, in a sector that receives significant amounts of public and individual monies, be held to higher standards of conduct?The issue of personal liability for corporate fault and what constitutes an ‘optimal level of liability’ for directors are long-standing. Several government bodies reviewed personal liability and corporate law sanctions of commercial directors in the last four decades. However, the specific position of volunteer directors has not been investigated in similar depth. The Australian Charities and Not-for-Profits Commission Legislation Review 2018 (the ACNC Legislation Review) provided a valuable opportunity to consider and address the standard of conduct expected of volunteer directors of charitable companies in Australia, albeit specifically focused on companies registered with the ACNC. The Review Panel’s final report contained three recommendations on directors of charitable companies registered with the ACNC. In particular, Recommendation 11 recommended that the statutory director’s duties contained in sections 180 to 183 of the Corporations Act be turned ‘back on’ for charity directors. This article considers the potential impact of the recommendation on the sector with specific reference to individual directors, charities and the regulation of the sector in general. The article cautions that imposing unrealistic compliance and complexity that is beyond charity capabilities, while also depleting the leadership pool and stifling regulatory development, could do significant long-term damage to the sector. Given the importance of the charity sector in Australian communities, Australian society will also suffer. Changes to the regulatory structure should, therefore, be approached with circumspection
