Last week, the Supreme Court of WA handed down its judgment in the case of Sandy v Yindjibarndi Aboriginal Corporation RNTBC [No 2] [2016] WASC 75 (YAC Case).

The YAC Case raises a number of crucial points that all Aboriginal corporations should be aware of.  Most importantly, the YAC Case should serve as a reminder of why corporations need to follow their Rulebook and the provisions of the CATSI Act.  Adopting good governance measures and sticking to the rules is the best strategy for preventing costly and time consuming court proceedings.

The appointment and terms of office of directors were central issues in the YAC Case. The Court ruled that the terms of all the YAC directors had expired and YAC therefore had no directors. The YAC Case raised a series of other issues, such as the validity of board decisions made for an improper purpose and what constitutes reasonable notice of a board meeting.

The five key messages that we took from the YAC Case are:

  1. Expiry of directors’ term - Directors cannot continue to act once their terms have expired. Any decisions made by directors after their terms have expired will be invalid.  We are often asked when a director’s term expires – the simple answer is to check the wording of the resolution appointing the director and check the terms of your Rulebook. A director’s term may expire after a certain number of years, or it may expire at a certain annual general meeting. It’s crucial to specify a term and ensure that a director ceases to act once that term has come to an end.
  2. Members’ control - The ultimate control of a corporation lies with its members.  Important decisions, such as the appointment of directors, are to be made by the members.  As a board, if you’re uncomfortable or unable to make an important decision, take it to your members and seek their input.
  3. Decision making - A decision made at a board meeting for an “improper purpose” will be invalid.  A decision may be made for an improper purpose, even if that improper purpose wasn’t the sole or dominant reason for making the decision.  In the YAC Case, a decision to admit 46 new members was found to be made for the improper purpose of manipulating the voting power at an upcoming general meeting.
  4. What is reasonable notice - The Rulebook of most corporations will allow a board meeting to be called by giving all directors “reasonable notice”. What constitutes reasonable notice will depend on a number of factors, including – the usual practice of the corporation and the nature of the business to be discussed at the board meeting. Where the business is urgent, a shorter period of notice may be acceptable. Aboriginal corporations need to be aware of postage times and mail delivery schedules for remote communities.
  5. Failure to give reasonable notice - Failure to give an individual director reasonable notice of a board meeting may invalidate the whole meeting and also any resolutions passed at that meeting. 

You can read the full YAC Case here.