The Best Interests Duty and Corporate Charities — The Pursuit of Purpose

Abstract

Most Australian charities are incorporated. Yet most directors, legal advisers and commentators are hard pressed to articulate a fairly fundamental obligation of charity directors: to act in good faith in the best interests of their corporation. At a time when shareholder primacy is being increasingly questioned for for-profit corporations and consideration of stakeholders or purposes is being written into corporations legislation in other jurisdictions, there is even greater need to think about what interests ought to be considered by charity directors. We argue that to act in the best interests of an incorporated charity means to act in a way that the directors genuinely believe will advance its purposes. As this is still a fairly amorphous standard, we suggest that it can be given content by means of directors’ obligations to give genuine consideration in the exercise of their powers in seeking to advance the corporation’s purposes.

Keywords: charity law, charities, best interests, purpose, duties, fiduciary