Meeting governance obligations
Māori land trustees are responsible for making decisions about the whenua for the benefit of all the owners.
Trustees are accountable to owners and must manage the trust in accordance with the trust order.
Their obligations are summarised in 12 principles. Most of these principles apply to all types of trustees, though advisory trustees won't be held accountable for any of the financial or administrative requirements.
1. Acquaintance — know your trust
The trustees must be familiar with:
- the property administered by the trust
- the terms of the trust order
- all issues affecting the trust.
This means trustees should know where the whenua is, what state it's in, any issues with the whenua or the trust, and the rules outlined in the trust order.
2. Adherence — stick to the trust order
The trustees must act in accordance with the terms of the trust order.
The trust order is agreed with owners when the trust is first set up. It outlines what trustees can and can't do and how they should run the trust.
3. Impartiality — treat everyone fairly
The trustees must treat all trust beneficiaries (owners) with the same degree of fairness. The trustees are there to act in the best interests of all the beneficiaries.
Investments must be made in accordance with the powers trustees have within the trust order. Trustees need to demonstrate prudence when investing, also known as the "prudent person test." When investing this might mean:
- having an Investment Policy with guiding principles and rules
- getting appropriate, independent investment advice when considering options.
5. Diligence and prudence — behave like a business person
The trustees are required to act with the same care, diligence, prudence and good judgement expected of business people managing the affairs of others.
For example, trustees must not spend money on anything unnecessary, and must pay accounts on time so the trust isn't charged extra fees.
6. Delegation of responsibilities — trustees are responsible for the mahi
The trustees must not delegate their responsibilities to anyone else unless the trust order clearly allows this, or unless delegation is permitted by law. However, they can employ professionals to help the trust.
7. Act jointly — work as a team
The trustees must work together. They must share responsibility for any wrongdoing or mistakes made. All trustees are accountable to the owners.
8. Act without personal profit — trustees aren't paid
The trustees must not benefit personally from being a trustee. If the trust order allows it, they can be reimbursed for expenses they incur in carrying out their role as trustee. For example, trustee travel expenses.
9. Pay the right people
The trustees must pay trust money only to the people named on the trust order (or to specialists engaged to do work on behalf of the trust). They will not be excused for paying the wrong person, even if they mistake the intention of the trust order, or take professional advice to make these payments.
10. Trust account information — keep proper accounts and records
The trustees must keep full and proper accounts. Owners, or their authorised agents, can ask to see the accounts and other financial information. When the new Trustee Act comes in in 2021, trustees will need to be able to provide "asset performance" information as well, for example the business plan, key performance indicators and results.
11. Declare conflicts of interest
There should be a plan for managing conflicts of interest — at a minimum any conflict should be declared. It's important to ensure trustees are not seen to be using their position for financial advantage for themselves, their whānau or friends.
For example: trustees are considering spending a lot of money on an IT system and one of the providers competing for the contract is the brother of a trustee. The trustee should declare the conflict and leave the boardroom during the discussion and decision-making.
It can help to have a register of trustees’ interests which details any personal issue or outside business which could conflict with their role as a trustee.
12. Regular disclosure — communicate with owners
Trustees must keep their owners informed and regularly provide full details of the financial position and performance of the trust. They must consult with owners on major policy issues and get their consent to any changes to the terms of the trust order.
You need to know which laws apply to your trust, and make sure you act within the law. You're not expected to be an expert, but you do need to know when to ask for legal advice or other external expertise.
The main laws that apply to Māori land trustees are:
- Trustee Act 1956, which will be replaced by the Trusts Act 2019 which comes into force in 2021, and
- Te Ture Whenua Māori Act 1993.
According to these laws, a trustee's key duty is “to maximise the assets and minimise the liabilities of the trust” to the best of their ability and within the law.
There are other pieces of legislation that a trust and trustees may need to adhere to, including:
- Privacy Act 1993
- Resource Management Act
- Health and Safety at Work Act.
If trustees don't do what they should
If owners believe that any or all trustees are not carrying out their duty, you can call them to account at any time. You can:
- start by talking to other owners about the issue
- talk to the trustees — you could email them or call them to find out more about whatever you're concerned about
- bring up the issue at an owners meeting.
If you don't feel like the issue has been resolved and you want to take things further, you can apply to the Māori Land Court (MLC) to:
- add, remove or replace a trustee, or
- terminate the trust.
The MLC may require a trustee to file a written report to the court, or to appear in court to discuss their actions within the trust.
Talk to the kaimahi at MLC if you're not sure how to approach the situation.
How to protect yourself as a trustee
To protect yourself against personal liability, you should:
- carefully read and understand the trust order and any other documents that define your duties and obligations
- make sure you're comfortable that the trust can perform what's being asked of you
- be actively involved in trust affairs
- take professional advice when necessary
- clearly show compliance by keeping detailed records that show, for example:
- regular trustee meetings have been held and who attended
- detailed minutes of any hui, documenting any decisions and the reasons for them
- up-to-date insurance for all trust assets is maintained
- trust funds are accounted for with separate bank accounts, full financial records and regular reporting.
The Māori Law Review has summarised examples of applications made to the Māori Land Court and the decisions reached in each case.
They can help you understand some of the pitfalls that trusts and trustees face, and learn how to avoid facing the same issues yourself.