Directors’ duties under the Companies Act 2015

The Companies Act, 2015 sets out the general duties of directors in sections 140 to 147. They are owed to the company.

The seven duties

1. Act within powers — follow the constitution and use powers for proper purposes.
2. Promote the success of the company — for the benefit of members as a whole, having regard to employees, suppliers, customers, the community and the environment.
3. Exercise independent judgment.
4. Exercise reasonable care, skill and diligence.
5. Avoid conflicts of interest.
6. Not accept benefits from third parties because of being a director.
7. Declare an interest in a proposed transaction with the company.

Statutory compliance

Directors are also responsible for keeping registers, filing annual returns and beneficial ownership information, and preparing financial statements. Failures attract penalties against the company and officers in default.

Insolvency

When a company is insolvent or nearly so, directors must consider creditors’ interests. The Insolvency Act, 2015 can make directors liable for fraudulent or reckless trading.

Protecting yourself

• Read board papers and ask questions; minute your dissent.
• Declare conflicts in writing.
• Consider directors’ and officers’ insurance.

This article is general information, not legal advice on your situation.

Get help from a verified advocate

This article is general information, not legal advice on your situation. If you need advice, describe your matter on Wakili Link and we will match you with a verified advocate who handles it.

• Corporate & commercial lawyers in Kenya
• Company registration
• Shareholders agreements
• How to verify an advocate in Kenya