As published in the Summer 2014 edition of CM Magazine.
Many corporations avoid using committees because of the perception that committees create more harm than good. The typical concerns are that committees may be used as a platform for unit owners to challenge the board or that they are a potential source of legal liability for the corporation. These types of concerns should be put to rest. Committees that are properly organized and administered do not pose any such risks. Rather than avoiding them, committees should be embraced, as they are often a great resource for the corporation. This article provides an overview of how committees benefit condominium corporations and how they should be created and administered in order to benefit from all the advantages of having committees while avoiding their potential negative aspects.
The Value of Using Committees
There are many benefits to using committees. Among other things, committees:
a. enhance the effectiveness of the board, by allowing the directors to leverage the skills and talents of the members of the community;
b. lessen the burden on volunteer directors;
c. broaden the board’s awareness of the opinions of other members of the community;
d. provide a training ground for future board members;
e. allow former board members to remain active in the community; and
f. allow members of the community to contribute without having to become directors.
Accordingly, serious thought should be put into the various areas where committees can be used to either supplement the efforts of the board members, or take the burden off the board entirely.
The Functions and Types of Committees
Fundamentally, there are two functions that committees provide. Committees either:
a. act as an advisory body to the board on specific matters; or
b. carry out a specific assigned task (organize annual barbeque party, prepare monthly newsletters, etc.)
The board of directors can create any type of committee that is needed, for example, welcoming committee, social committee, landscaping committee and communications committee. For most corporations, there are virtually no restrictions to the type of committees that may be established. However, some corporations have bylaws that specify that the only type of committee that may be established is an “advisory committee”, meaning a committee that only has the power to provide advice to the board. Therefore, it is important that the corporation’s bylaws be reviewed carefully to determine whether or not there are any such restrictions.
The Legal Framework
The Condominium Act, 1998 (the “Act”) does not regulate the creation and use of committees (the sole exception being audit committees). Rather, the condominium corporation’s bylaws deal with the appointment and administration of committees. Typically, the condominium corporation’s Bylaw No. 1 (also known as the “Organizational Bylaw”) permits the board to appoint committees, but often imposes certain requirements, such as that the committee members need not be directors, that the members of such committees must be appointed by the board to hold office, and that they may be removed at any time by resolution of the board.
Please bear in mind that Section 27 of the Act specifies that the board is empowered to manage the affairs of the corporation. Committees cannot have independent decision-making power and cannot legally challenge the authority of the board to make decisions in any matter. As well, the board appoints the committee members in its sole discretion; there is no legal right of unit owners to join committees just because they want to participate in the committee.
In short, committees serve “at the pleasure of the board” and can be terminated at any time by the board.
Are Committee Members Officers?
The typical wording of the bylaws gives rise to the conclusion that committee members must be officers of the corporation. There are two reasons for this conclusion, namely:
a. the provision related to the appointment of committees is typically found under the heading “Officers”; and
b. the typical wording of the section that deals with the appointment of committees members states that “members are appointed to hold office”.
Whether or not the condominium corporation’s bylaws specify that committee members are “officers” of the corporation, it is good practice for the board to specify that committee members are “officers” of the corporation in the resolution that appoints them.
Liability of the Committee
As noted above, committee members are officers of the corporation, and as officers, they are typically covered by indemnity and insurance with respect to any costs or losses that they personally incur while carrying out their duties, or with respect to any costs or losses that the corporation incurs with respect to the acts or omissions of the committee.
Specifically, most condominium corporations have bylaw provisions in place which require the corporation to indemnify the corporation’s officers, and further, require the corporation to obtain and maintain insurance to back up the corporation’s indemnification obligations. However, even if the bylaws are silent on the insurance issue, please note that Section 39 of the Act requires condominium corporations to obtain and maintain directors’ and officers’ insurance (if such insurance is reasonably available). To be certain that the insurance coverage is in place, the corporation should require its insurance advisor to confirm, in writing, that the corporation’s directors and officers insurance policy does cover committee members.
Although it is reassuring that the corporation’s insurance coverage would protect the committee members and the corporation in the event of a claim resulting from a liability caused by a committee, in order to limit any potential liability in the first place, the board should ensure that:
a. the committee is not given powers to bind the corporation with respect to any transaction; and
b. the committee is not given any task which requires the members to incur risk of personal injury or risk of injuring others or of causing property damage.
As well, even if the board does not delegate real decision- making powers to the committee, it is not desirable to have unsupervised committees. The board must supervise the activities of the committee, and it can do so by:
a. having a director on the committee (who may be appointed to act as chair); and
b. requiring regular reporting by the committee to the board.
Creation and Organization of a Committee
In order to ensure that committees are effective and productive, particular care has to be paid to how committees are created and organized.
The typical bylaw provision specifies that committees must be created by resolution of the board. Such resolution should set out, among other things, the following:
a. name of committee;
b. mandate and responsibilities;
c. term (duration) of the committee (if applicable);
d. deadlines for completing the mandate (if applicable);
e. committee members (and functions, if applicable);
f. chairperson duties and powers;
g. meeting procedures; and
h. reporting procedures.
The organization of the committee can vary, depending on the mandate of the committee, but generally speaking, the following should be considered:
a. the committee must have a chair (who may be filled by board member); and
b. the committee must be relatively small (three to five members maximum); and
c. the committee must be run in “business-like” manner, which means:
i. it must have regularly scheduled meetings (same as board meetings);
ii. written reports must be required from the committee members at every meeting as to what they have accomplished;
iii. meetings must conclude with the assignment of action items among the members, with deadlines for completion;
iv. minutes of the meeting should be circulated afterwards, to remind the members of the business that was transacted and what further steps need to be taken and by whom; and
v. written reports must be provided to the board on the progress of the committee.
Ensuring Effective Committees
The proper creation and organization of a committee goes a long way toward ensuring that it will be effective, but the human factor should not be overlooked. Ultimately, the quality of the committee will depend on the quality of its committee members.
A quality committee requires a number of things, as suggested below.
When recruiting members, the board must clearly communicate to the prospective members the purpose of the committee, the skills and knowledge required of the committee member, and the time commitment required. This would give sufficient information to would-be volunteers to determine whether they would be able to properly contribute to the committee or not.
From the board’s perspective, the recruitment should be based on a careful analysis of the abilities of the candidates, based on what they can contribute to the committee, not based on political calculations or favours to friends.
Generally speaking, for each prospective candidate, the board should assess whether the candidate:
a. has the required skills and expertise;
b. has good communication and organizational skills;
c. has the ability to work in groups;
d. is committed to the goals of the committee; and
e. has the time to dedicate to achieving the goals of the committee.
No matter how enthusiastic volunteers are to join a committee, for long-term success, the committee members have to be encouraged to continue to give their best. At a minimum, the board should provide:
a. a clear mandate with realistic goals and timelines, which requires reasonable amount of effort and skills;
b. support and guidance from the chair to ensure that the committee operates efficiently and harmoniously;
c. respect and due consideration by the board to the committee’s recommendations; and
d. consistent show of appreciation (for example, praising the committee and its accomplishments in community letters, and by allowing the committee members to present their accomplishments in a report at the AGM).
There is absolutely no reason for condominium corporations to avoid using committees. The benefits of using them far outweigh any potential risks, and as outlined above, if careful thought is put into organizing and administering the committees, there should not be any significant risks at all. So, go ahead, tap the potential, put committees to work!