Produced by Julie Garland-McLellan, one of Australia’s most internationally acclaimed company directors and board advisors. She is renowned for her practical experience as well as deep governance expertise and qualifications. She is a consultant at AltoPartners Australia and is based in Sydney, Australia and travels worldwide to bring boards and directors the practical development and insights that they need.

Contribution by Jean-Philippe Saint-Geours, a Senior Advisor at Leaders Trust International France, a Member of the Executive Committee and a former Global Chairman of AltoPartners. His executive practice encompasses general management and Board directorships. His search experience sectors include industry, distribution, media, public services, insurance and trade organizations. He conducts Boards of Directors assessment services and a yearly survey on Corporate Governance trends in France. Jean-Philippe is closely involved in the Institute of French Directors (IFA) taskforces and events.

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The Director’s Dilemma - June 2026

This month our real-life board dilemma concerns a director who has joined a board and immediately helped make a decision that he is now worried about.

Jacinta is the newly minted chair of a not-for-profit company board. The organisation has had a tumultuous few years and, at the recent EGM, the whole board apart from one director were replaced with new elected directors. The six new directors attended their first meeting four weeks after the EGM and were asked to sign the audited financial statements. As they had not been present when the activities were undertaken, or when the draft financial statements were recommended to the auditor, the directors resolved to authorise the ‘ongoing director’ to sign the accounts. The auditor had given the accounts a clean opinion and the ongoing director and the executive team members (EO, CFO, and Co Sec) confirmed that they believed, to the best of their knowledge, that the accounts were correct.

The one ongoing director resigned at the end of the meeting and the accounts were lodged with the relevant regulators the following day. These events were documented in the minutes which were approved at the next board meeting. Then some issues emerged with a couple of major grants that had not been reflected in the accounts, even as contingencies, although they were identifiable in costs incurred and communications from the granting body stating that the costs would not be reimbursed. These costs, and the possible claw back of other grant money already spent, place the company’s solvency at risk. The Co Sec has said that, because the directors didn’t abstain or disagree with signing and lodging the accounts, the directors could be held liable.

Jacinta is worried that her colleagues now want to resign, the company is becoming insolvent, and she is at risk. She wants to lead the company to survive.

What should she do?

Jean-Philippe’s Answer

Jacinta is facing a serious governance failure, not a financial reporting problem. The accounts appear to have been validated without sufficient cross-checking, despite identifiable grant-related costs, unreimbursable expenses, and communications from granting bodies indicating emerging liabilities. In the French not-for-profit context, where associations are not always required to maintain an audit committee, this type of governance gap can remain undetected until solvency is threatened.

The immediate concern is to stabilise the organisation and protect the board from further exposure. The resignation of the sole continuing director immediately after the accounts were approved may leave the newly appointed directors vulnerable under French governance rules because they did not formally abstain from, or oppose, the approval and lodging of the accounts.

Jacinta should resist the temptation to begin immediate legal action against the executive committee, auditor, or former director. At this stage, the priority is cooperation, disclosure, and fact-finding.

1. The board should establish a small ad hoc “salvation committee” of three to four directors, including a financial expert and someone close to the organisation’s mission. Its role should be to conduct professional technical hearings with the CEO, CFO, company secretary, auditor, and resigned director to establish the full extent of liabilities, assess whether further issues may emerge, and determine what can still be negotiated with banks or granting authorities.

2. A tentative road map is designed by the ad hoc Committee that includes bank negotiations and project prioritisation decisions. The aim is to rebuild trust, keep directors from resigning, and unite the board and executive team around a realistic survival roadmap.

3. The roadmap is presented to the board for approval

4. The plan goes to the EGM for final approval

5. The approved plan is implemented

The board should initially “play it cool” to secure cooperation and obtain a complete picture of events. Only once the facts are fully understood should the organisation determine whether this was negligence, superficial oversight, or deliberate concealment warranting legal action.

Julie’s Answer

Oh dear. This is what can happen when the board treats signing off on something as a formality, rather than a commitment to the truth.

First Jacinta needs to rally her board. They – jointly – signed off on these accounts. It doesn’t matter whose signature is on the paper; the whole board authorised the signatory to sign on their behalf. Piecemeal resignations will leave a patchwork of slightly differing exposures and open the possibility for the board to fracture. As Ben Fanklin said, “We must all hang together, or, most assuredly, we shall all hang separately.” Having a united board makes it much more difficult for legal action to single out any current or former member.

Next, Jacinta needs to have a candid conversation with the board and senior executives to explain their duty to escalate concerns (or become liable) and to find out what was known, when, and by whom. This will ensure that escalation duties are understood and the board is fully informed and kept that way into the future.

The CEO and the responsible manager should then prepare a clear report outlining the grant obligations, where these have not been met, and the possible remedies together with costs, timeframes, and implications for solvency.

All of this should be done as quickly as possible. Days, not weeks.

At this point she has the information to give to her legal team and can work with them on a strategy for engaging with the client to propose a solution that does not include a claw back of the entire grant amount. Hopefully, the client will be more interested in getting the services provided and the grant back on track (although without paying for items that are not included) than in making an example of Jacinta’s company to deter others from ‘stretching’ grant expenses. If not, or if a letter of claim is received, she should immediately seek and appoint an administrator.