Can Committee Members of an Association Be Paid?

Whether the president should be paid is a question that splits many an annual meeting. The Act does not forbid payment, but it controls who decides, requires disclosure, and attaches a price to it in the form of exposure to liability.

Who decides

The committee cannot vote itself pay. Under section 29 of the Associations Incorporation Act 2023 the authority must come from the rules, which the Schedule requires to state “the remuneration, if any, that committee members are entitled to receive” (item 5(g)), or from a special resolution of the members, passed by 75 per cent on 21 days’ notice and lodged with the Registrar. Either way the members, not the committee, authorise it. Section 40(7) confirms that, unless the rules provide otherwise, the committee’s setting of committee members’ compensation for services “in any capacity” is not itself a material interest requiring disclosure, so a committee may fix the detail once the members have approved the principle.

What counts as remuneration and benefits

“Remuneration and other benefits” is wide: sitting fees, honoraria, salaries for executive roles, allowances, vehicles, housing, airfares, school fees, loans on favourable terms. It also covers payment for services in another capacity, such as a committee member who is paid as the association’s bookkeeper or contractor; section 40(7) mentions compensation “for services in any capacity”. What is not remuneration is “payment of reasonable expenses and indemnification or insurance for actions as a committee member allowed by this Act” (section 38(5)). A committee member may be reimbursed the bus fare to the meeting without any resolution.

Disclosure in the annual report

Section 76(e) requires the annual report to “state, in respect of each committee member or former committee member of the incorporated association, the total of the remuneration and the value of other benefits (including the reimbursement of any expenses) received by that committee member or former committee member during the year”. The disclosure is by name and includes expense reimbursements. The report must be available to members for a month before the annual meeting (section 75). Section 76(f) separately requires the number of employees paid above the employee threshold amount, K150,000 a year in the draft Regulation. A paid executive who is also on the committee appears under both.

The price of being paid

Section 38(4) provides that a person who serves as a committee member “without remuneration or expectation of remuneration must not be liable to the incorporated association or its members for monetary damages for any action taken, or any failure to take any action, as a committee member”, except for a financial benefit to which he was not entitled, intentional infliction of harm, breach of the duty to disclose a material interest, or a criminal conviction. The unpaid volunteer is thus insulated from suits for negligent decisions. A paid committee member loses that shield and answers for breach of the duty of care under section 38(1) like a company director. The same distinction applies to public officers under section 58(3). See liability of committee members.

Pay is not a distribution, but it can become one

Paying a committee member for genuine work is an expense in furtherance of the objects. Paying committee members sums that bear no relation to work done is a distribution of profits to members in disguise, contrary to the undertaking in section 3 on which incorporation was granted, and a ground for removal from the register under section 108(i). The Registrar can inspect the accounts under section 154 to test the difference, and a fraudulent application of association property is an offence under section 164 punishable by up to K50,000 or two years.

Indemnity and insurance are separate

Section 49 governs what the association may do to protect committee members from liability: it may not indemnify criminal liability, may not (unless the rules provide otherwise) indemnify liability to the association itself or liability arising from breach of sections 39, 41 or 44, but may with committee approval insure them against civil liability and defence costs. Insurance premiums paid under section 49 are not remuneration. See indemnity and insurance.