Being appointed a director of a Kenyan company comes with a specific set of statutory duties under the Companies Act 2015, sections 142 to 147, whether or not anyone ever sits you down and explains them. They apply the same way to the sole director of a two-person company as they do to a director of a large listed company. Here is what each one actually requires in practice, not just the textbook phrasing.
Act within your powers (section 142)
A director must act in accordance with the company’s constitution and only exercise powers for the purposes they were given. Acting outside this, for example using a power meant for one purpose to achieve an unrelated goal, can expose the director personally, not just the company, and any resulting decision can potentially be challenged as ultra vires.
Promote the company’s success (section 143)
This is the broadest duty: act in good faith in the way most likely to benefit the company’s members as a whole, having regard to the long-term consequences of a decision, the interests of employees, the company’s relationships with suppliers and customers, the impact on the community and environment, and the need to act fairly between different members. Where a company is insolvent or nearing insolvency, this duty effectively shifts toward the interests of creditors instead of members, which is a change many directors do not realise has already happened until it is tested in a dispute.
Exercise independent judgment (section 144)
A director cannot simply follow instructions from whoever appointed them, an investor, a parent company, or a majority shareholder, if doing so conflicts with the company’s own interests. A director nominated by a specific shareholder is still allowed to look after that shareholder’s interests, but only to the extent this is compatible with the interests of the company itself.
Exercise reasonable care, skill and diligence (section 145)
The standard is objective and subjective at once: the general knowledge, skill and experience reasonably expected of someone in that role, plus whatever additional knowledge, skill and experience the particular director actually has. A director with financial expertise is held to a higher standard on financial decisions than a director without it, even if both hold the same title.
Avoid conflicts of interest, and don’t accept benefits from third parties (sections 146 and 147)
A director must avoid situations where their personal interest conflicts, or could conflict, with the company’s interest, and must not accept benefits from third parties given because of their position as director. Where a genuine conflict cannot be avoided, disclosing it properly and having it authorised by the other directors or members, rather than simply proceeding, is what actually protects the director.
What happens if these are breached
Consequences run from civil liability to the company, fines, and prosecution, to disqualification from acting as a director of any Kenyan company for a period that can run into several years, on top of any separate liability that arises where the breach also involves insolvent trading or a specific offence such as bribery. These duties are not a formality for the annual returns. They are the legal basis on which a director’s decisions can be challenged, personally, long after the decision itself was made.
