The Duty of Care as a Prism for Highlighting Material Considerations for Charity Directors

Corporate law scholarship is witnessing a resurgence of interest in corporate
purpose, emphasising the potential role of purpose in governance. This is all
the more so for incorporated charities, which are for-purpose entities.
However, while purpose-based governance promises many benefits, it also
generates difficulties for director decisions relating to change of purpose or to
actions that simultaneously advance and hinder the achievement of a
purpose. The traditional controls on the exercise of directors’ discretionary
powers, the best interests duty and the proper purpose duty, are very difficult
to apply in these situations if they are construed primarily as focusing on
advancement of an entity’s purposes. This article examines the duty of care
as an alternative control mechanism or as a prism for highlighting material
considerations that ought to be taken into account by charity directors if the
best interests duty and proper purpose duty are characterised in a more
process-oriented way. Articulating material considerations can help directors
satisfy the duty of care or the alternatively interpreted best interests and
proper purpose duties.