DUTIES OF COMPANY DIRECTORS

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In Kenyan law, a company is a separate legal person from its owners. Because of this, directors owe their duties to the company itself, not to individual shareholders or other groups. These duties are divided into general responsibilities (how to act) and specific administrative tasks (what to do).

1. GENERAL STATUTORY DUTIES

These are the core principles directors must follow when managing the company:

  • Duty to act within powers: Directors must follow the company’s constitution (its Articles and Memorandum). They should only use their power for the specific purpose it was given, not for personal reasons.
  • Duty to promote the success of the company: A director must act in good faith to ensure the company succeeds in the long term. This means considering the interests of employees, the community, the environment, and being fair to all members.
  • Duty to exercise independent judgment: Directors must make their own decisions. They should not be "puppets" for others. There are three parts to this:
    • Make individual choices on matters.
    • Seek professional advice if a topic is outside their expertise.
    • Avoid unlawfully influencing other directors or stopping them from being independent.
  • Duty to exercise reasonable care, skill, and diligence: A director must take their job seriously. The law uses two tests here:
    • Objective: They must act as a "reasonable person" in that position would.
    • Subjective: If a director has special expertise (like being a lawyer or accountant), the law expects them to use that higher level of knowledge.
  • Duty to avoid conflicts of interest: Directors must not use the company's property, information, or opportunities for their own personal gain. If they are "connected" to a deal the company is making, they must declare that interest.
  • Duty not to accept benefits from third parties: Directors should not accept gifts or bribes from outsiders that might influence how they act.

2. SPECIFIC AND ADMINISTRATIVE DUTIES

These are mandatory tasks required by the Companies Act:

  • Financial Records: Directors must ensure the company keeps proper accounting records for at least 7 years at the registered office.
  • Organizing Meetings: They have a duty to call general meetings when members ask for them and to prepare and present annual financial statements and reports.
  • Allotting Shares: Directors can only issue or "allot" shares if they are authorized by the company's rules or a specific resolution.
  • Declaring Interests: If a director has a personal interest in a company transaction, they must tell the other directors (and shareholders in public companies) within 72 hours. 

In conclusion, think of a director as a guardian of a house. They don't own the house (the shareholders do), but they have the keys. Their job is to keep the house in good repair, pay the bills, and make sure the "owner" gets the benefits of living there. If the guardian starts selling the furniture for their own cash, or ignores a hole in the roof, they have failed their duty and can be removed or punished.

 

Catch you in the next blog!

 

Disclaimer- The information provided is for general informational purposes only and should not be considered as professional advice. Please consult a qualified professional for specific guidance. 

 

 

 

 

 

 

 

Comments

  1. MwitaJanuary 8, 2026 at 4:44 AM

    Great stuff right there💯

    ReplyDelete
  2. AnonymousFebruary 10, 2026 at 11:50 PM

    during my attachment, I won't say where, the direction of that particular company was always in and out of his office, quite frankly he wasn't around much, it weren't work either cause he be chilling at all his usual spots around town, if let's say something goes a miss and as an employee I get blamed for it, can I use that from a legal standpoint to get out of the bind

    ReplyDelete

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