Resignation and removal sound like opposite ends of the same event, but in Kenyan law they follow different rules, run on different clocks and leave different obligations behind. For a company, the difference decides how quickly a seat is empty and who must act. For a director, it decides what they are still bound to do after they have said they are leaving. This article explains the distinction and what to write into a director’s contract so that it works.
Removal is statutory and does not need the director’s agreement
Section 139 of the Companies Act, 2015 lets a company remove a director by ordinary resolution at a meeting, before the end of the director’s period of office, despite anything in any agreement between the company and the director. Special notice is required for the resolution. No contract can promise a director a seat that members are unwilling to keep. Removal also does not depend on any notice period in the director’s own paper.
Removal ends the office. It does not by itself end a separate contract. If the director also has a contract of service as an executive, the employment must be ended lawfully on its own terms. Our article on whether a director is an employee covers that split.
Resignation is not set out in the Act
The Companies Act has no general section on how a director resigns. It deals with the resignation of auditors in sections 745 and 746, but not of directors. A director’s resignation is therefore governed by the company’s Articles, the director’s appointment letter or contract, and the general law. In practice the Articles often say that a director may resign by written notice to the company, and that is the first document to read.
This gap is where disputes arise. Does resignation take effect on delivery of the letter, or at the end of a notice period? Can the board refuse to accept it? If the Articles are silent, the position can be unclear, and it is far better to settle it in writing at appointment.
Notice periods belong in the contract
A notice period for a director can sit in two places. Where the director is also an employee, the Employment Act applies. Section 35 deals with termination by notice, and the minimum depends on how the employee is paid. The Act’s terms are minimums, and any agreement to waive them is void under section 3(6). A contract may give more notice than the Act requires, never less.
Where the director is an office-holder with a services or appointment agreement, notice is a matter of contract. A three-month period is common, and the same period should be used in the employment version and the services version so that the exit does not depend on which route was chosen. Two points need care:
- A notice period in the contract binds the contract. It cannot stop members from removing the director under section 139.
- A director who resigns the office can leave the board at once if the Articles allow it, even while a contractual notice period for fees or services is still running. Say what happens to fees in that case.
Filing the change
Section 138 requires the company to notify the Registrar of Companies of a change in its directors within fourteen days. The clock runs from the change, whether by resignation or removal, so assign someone to prepare the filing before the departure date. For licensed firms, the Capital Markets Authority may need to give prior consent, which is covered in our article on replacing a director of a licensed firm.
Drafting checklist
- State whether resignation needs written notice, to whom it is addressed, and when it takes effect.
- Align the notice period across any employment or services agreement and the Articles.
- Deal expressly with fees and benefits during notice, and with garden leave if wanted.
- Require handover of company property, records and access credentials.
- Keep confidentiality, and any restraint that is reasonable, running after exit.
- Reserve the company’s right to propose removal under section 139 regardless of notice.
- Name who files the notice of change within fourteen days.
A short illustration
A non-executive director signs an appointment letter requiring three months’ notice. She decides to leave and delivers a resignation letter. If the Articles let a director resign by written notice effective on delivery, the board seat is vacant at once. Whether fees run through the notice period depends on the letter. Now reverse it: members dislike a director and pass a section 139 resolution. The seat is gone immediately, but the director may still argue that notice or fees were owed under the letter. Writing the answer in advance prevents a dispute at the worst moment.
The short version
Removal is statutory and immediate once members pass the resolution. Resignation depends on the Articles and the contract, and the Companies Act is silent on it. Settle both in writing, align notice periods, and diarise the fourteen day filing.
How We Can Help
Clay & Associates Advocates drafts director appointment letters, executive contracts and exit documents, and handles removal resolutions and Registrar filings. Contact our corporate and commercial team. For what a director owes the company until the last day, see our guide to a director’s legal duties.
Sources: Companies Act, 2015 (Cap. 486), sections 138, 139, 745 and 746; Employment Act, 2007 (Cap. 226), sections 3(6) and 35.
Frequently asked questions
Can a director resign without notice?
It depends on the Articles and the director’s contract. The Companies Act has no general rule, so check both documents.
Can a notice period stop a director being removed?
No. Section 139 allows removal by ordinary resolution despite any agreement.
Who tells the Registrar?
The company must notify the Registrar within fourteen days of the change under section 138.
Do the same notice rules apply to every director?
No. An executive director with a contract of service is also protected by the Employment Act. A non-executive director is governed mainly by the Articles and the appointment letter.
Need advice on your own matter?
Tell us what you are dealing with. You will know what it involves and what it costs before you commit.
This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.
