Director duties Kenya boards must follow are now codified in the Companies Act 2015. Yet many boards still treat them as background scenery rather than a working checklist. In this article we walk through the seven statutory duties, the governance habits that decide cases, and the practical steps chairs, directors and general counsel can take to keep decisions defensible long after the meeting ends.
At a glance
- Sections 140 to 148 of the Companies Act 2015 codify seven general duties that every director in Kenya owes the company.
- Section 143 (promote the success of the company) is judged on what the director honestly believed at the time, so contemporaneous papers are everything.
- Conflicts of interest under sections 146 and 148 must be declared before the decision, recorded in the minutes, and managed during the meeting.
- Substantial property and related-party transactions under sections 211 to 220 require shareholder approval; skipping the procedure is a common and costly mistake.
- Sector overlays from the CMA Code, the CBK Prudential Guideline and Mwongozo raise the bar for listed, banking and state-owned company directors.
The legal framework
The Companies Act 2015 (No. 17 of 2015) replaced a colonial-era statute and, for the first time in Kenya, set out directors’ general duties in the statute itself. Sections 140 to 148 codify the seven duties. Section 149 confirms that these duties run in parallel with the common-law and equitable duties they replaced, and that breaches attract the same remedies. The Companies (General) Regulations 2015 supply the procedural plumbing, including forms for declarations and registers. Together these instruments give directors a single point of reference for the standards they must meet.
Layered on top are sector codes. The Capital Markets Authority Code of Corporate Governance for Issuers of Securities to the Public 2015 applies on an apply-or-explain basis to listed issuers. The Central Bank of Kenya Prudential Guideline on Corporate Governance (CBK/PG/02) binds banks and other CBK-regulated entities. Mwongozo, the Code of Governance for State Corporations, governs parastatal boards. Each code adds expectations on board composition, committee structure, conflicts management and disclosure that go beyond the Act.
Two further sources shape the duty landscape. Article 10 of the Constitution and Chapter Six on leadership and integrity bind directors of public bodies and inform the standards expected of directors generally. The Insolvency Act 2015 then changes the calculus once a company is in financial distress: directors must shift their focus toward creditors, and risk personal liability for wrongful trading and similar conduct. We return to that overlay below.
The seven statutory duties in plain language
s. 142 — act within powers
A director must act in accordance with the company’s constitution and exercise powers only for the purposes for which they were conferred. In practice this means reading the articles before granting a guarantee, issuing shares or signing a major contract. If the articles require board approval by a specified majority, an ordinary majority will not do. Acting outside powers can expose the director personally and may render the transaction voidable.
s. 143 — promote the success of the company
This is the heart of the codification. A director must act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its members as a whole. The test is subjective: the question is what the director honestly believed, not what a court would have decided. The section then lists factors to have regard to, including the long-term consequences, the interests of employees, relationships with suppliers and customers, the community and environment, the company’s reputation, and fair treatment of members.
s. 144 — exercise independent judgement
A director must not surrender their judgement to a parent, a nominator, or a dominant fellow director. Nominee directors are common in Kenya, particularly in joint ventures and investor-backed companies. The duty does not prevent a director from listening to a nominator; it does prevent the director from voting on instructions without thinking.
s. 145 — reasonable care, skill and diligence
The standard is dual. It is what would be expected of a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of someone in that role (the objective limb), and the actual knowledge, skill and experience that this director has (the subjective limb). A qualified accountant on the audit committee is held to a higher standard on accounting matters than a director without that background.
s. 146 — avoid conflicts of interest
A director must avoid situations in which their personal interest conflicts, or may conflict, with the company’s. The duty bites on situations as well as transactions, so a directorship on a competing board, a family shareholding in a supplier, or a personal investment in a target can all engage it. The articles may permit the board to authorise a conflict; if so, the authorisation must be specific and recorded.
s. 147 — no benefits from third parties
A director must not accept a benefit from a third party that is given because of the directorship or anything done as director. Hospitality and gifts above a modest threshold should be declared and, if material, refused. The duty has no de minimis floor written into it, so a clear gifts and hospitality policy is the practical answer.
s. 148 — declare interest in proposed transactions
Before the company enters into a transaction or arrangement, any interested director must declare the nature and extent of the interest. The declaration must be made to the other directors. It must be specific enough to allow them to assess it. Section 151 then requires a similar declaration where the company has already entered into the transaction and the director’s interest emerges later. Section 152 sets out the consequences of failure to declare, which include a fine and, depending on the circumstances, rescission.
Analysis: the governance habits that decide cases
Paper the reasoning — s. 143 is a subjective test, only contemporaneous papers prove good faith
Because section 143 turns on what the director honestly believed at the time, the board pack and the minutes do the heavy lifting if the decision is later challenged. We routinely see minutes that record only the resolution, not the reasoning. That is a missed opportunity. The minutes should record the options considered, the factors weighed (including those listed in section 143), and the reasons for the choice. A director who later faces a derivative claim or an insolvency-era review will be in a far stronger position if the paper trail shows a considered decision.
Maintain a live conflicts register — transaction-specific, tabled at every meeting
A one-off declaration at appointment is not enough. We recommend a register that lists each director’s standing interests (other directorships, shareholdings of five percent or more, close-family interests in counterparties) and is tabled at every board meeting for confirmation and update. Transaction-specific declarations under section 148 then sit on top of that register. The chair should ask, as a standing item, whether anyone has an interest to declare in any item on the agenda. Silence after that prompt is itself a record.
Authorise conflicts where the articles permit — specific, recorded, revisited
Many articles in Kenya allow the board (or in some cases the shareholders) to authorise a conflict. Authorisation is not a blanket waiver. It should identify the specific situation, the scope of permitted activity, any conditions (such as exclusion from related papers and meetings), and a review date. A conflict authorised in 2024 for one project cannot be assumed to cover an unrelated 2026 transaction.
Take advice but record the decision — protecting s. 144 independence
Directors are entitled, and often required, to take legal, financial and technical advice. Taking advice does not breach section 144; following it blindly might. The minutes should record that advice was taken, the substance of the advice, and that the board considered and accepted (or modified) it. This protects both the section 144 independence point and the section 145 care and skill point.
Worked hypothetical: the director on two competing boards
Imagine a director, A, who sits on the boards of Company X and Company Y. Both companies decide to bid for the same public tender. A’s duties under sections 146 and 148 are squarely engaged. The right sequence is: declare the conflict in writing to each board before either bid is discussed; absent oneself from all meetings, papers and electronic discussions on the tender at both companies; arrange for the company secretaries to firewall information; and consider whether to resign from one board if the conflict is structural rather than transactional. In our view, simply declaring the conflict and remaining in the room is not enough. The recusal must be visible in the minutes, and the firewall must be documented. If A is a nominee director, the nominator should also be informed and asked not to brief A on the matter.
Related-party transactions: ss. 211 to 220 as armour
Sections 211 to 220 govern substantial property transactions, loans, quasi-loans and credit transactions involving directors and persons connected with them. Where the threshold is met, shareholder approval is required before the transaction is entered into. The procedure is often skipped on the assumption that everyone in the group already knows. That assumption is wrong. A transaction entered into without the required approval is voidable at the company’s instance, and the director and any connected person can be liable to account for gains and indemnify losses. In our view, the section 211 to 220 procedure, properly observed, is some of the best protection a director can have: once shareholders have approved on full disclosure, the transaction is much harder to unwind.
Derivative claims under ss. 238 to 241: what the court actually weighs
The Act gives members a statutory route to sue in the company’s name for wrongs done to the company. Section 241 sets out the criteria the court applies when deciding whether to give permission to continue a derivative claim. The court considers, among other things, whether the member is acting in good faith, the importance a person acting under section 143 would attach to continuing the claim, whether the act or omission has been (or could be) authorised or ratified, whether the company has decided not to pursue the claim, and whether the cause of action is one the member could pursue in their own right. In our view, boards that document the section 143 reasoning at the time of the decision give themselves a real advantage at the section 241 permission stage, because the court is asked to imagine a hypothetical director acting properly, and contemporaneous papers make that exercise concrete.
Duties on the eve of insolvency — the Insolvency Act 2015 overlay
Once a company is, or is likely to become, unable to pay its debts, the directors’ focus must shift. The Insolvency Act 2015 introduces a regime broadly analogous to wrongful trading: a director can be ordered to contribute to the company’s assets if they knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation and failed to take every step a reasonably diligent person would have taken to minimise loss to creditors. Standard practice in distress is to increase the frequency of board meetings, take and document advice, consider available rescue procedures (including administration), and ensure that no new credit is taken on without a reasonable basis for repayment.
Sector overlays: CMA Code, CBK Guideline, Mwongozo
For listed issuers, the CMA Code raises expectations on board composition (including independence), board evaluation, related-party disclosure and integrated reporting. The apply-or-explain regime means non-compliance is not automatically a breach, but the explanation must be substantive. For CBK-regulated entities, the Prudential Guideline (CBK/PG/02) imposes vetting of directors, limits on multiple directorships, and committee requirements that go beyond the Act. For state corporations, Mwongozo sets standards on board induction, ethics and performance contracting, and is read with Chapter Six of the Constitution.
A comparative note
Sections 140 to 148 of the Kenyan Act are closely modelled on sections 170 to 177 of the United Kingdom Companies Act 2006. Kenyan courts have not yet generated a deep body of case law on the codified duties, and in our view English authority on the equivalent UK sections is persuasive (though not binding) when the wording matches. Boards should not assume identity of outcome on every point: Kenyan courts will read the duties against the Constitution, the sectoral codes and local commercial practice.
What you should do now
For chairs and company secretaries
Audit the board pack template. It should prompt the directors, for every substantive item, to identify the section 143 factors, record any conflicts, and minute the reasoning. Refresh the conflicts register at every meeting. Calendar an annual board effectiveness review and document the actions arising.
For individual directors
Read the articles of every company on whose board you sit. Keep your own private file of declarations made, advice taken, and dissent recorded. If you are a nominee, agree in writing with your nominator how information will flow and how conflicts will be handled. Do not rely on the company secretary to remember on your behalf.
For companies entering significant transactions
Identify, early, whether sections 211 to 220 are engaged. If they are, plan the shareholder approval into the timetable rather than treating it as an afterthought. For listed companies, map the CMA Code disclosure obligations. For regulated entities, confirm whether prior CBK or other regulator no-objection is required.
For audit and risk committees
Add a standing item on directors’ duties compliance: conflicts register movement, related-party transactions in the period, section 148 declarations made, and any matters reserved to the board that were nonetheless taken below. Where the company is approaching financial difficulty, request a paper on insolvency-era duties and the steps being taken.
Frequently asked questions
Q1. Do the seven duties apply to non-executive directors in the same way as to executive directors?
Yes. The Act draws no distinction. The section 145 care and skill standard does, however, factor in the actual knowledge, skill and experience of the director, so the practical content of the duty can differ.
Q2. Can the company indemnify a director against breach of these duties?
The Act limits indemnities in favour of directors against liability to the company. Indemnities for defence costs and for liability to third parties are more readily permitted, subject to the Act and the articles. Directors and officers insurance is standard and we recommend it.
Q3. Does shareholder ratification cure a breach?
Sometimes. Members can ratify some breaches, but not all, and the votes of the director concerned and connected persons are disregarded. The interaction with sections 211 to 220 and with sectoral codes needs careful thought.
Q4. What is the limitation period for a claim against a director?
Generally six years for breach of duty claims, but shorter and longer periods can apply depending on the cause of action and any fraud. [VERIFY: confirm current Limitation of Actions Act position for directors’ duty claims].
Q5. Are alternate directors subject to the same duties?
Yes. An alternate acting as a director owes the same statutory duties while acting and should make the same declarations and observe the same conflicts procedures.
How OLM Law can help
We advise boards, chairs, company secretaries and individual directors on the day-to-day application of the Companies Act 2015 and the sectoral codes. Our work ranges from board pack and minute design, conflicts policy drafting and director induction, to advising on substantial property transactions, derivative claims and insolvency-era duties. To discuss your board’s governance posture, contact [PARTNER NAME], Partner, Corporate & Commercial, OLM Law Advocates LLP.
Sources and authorities
- Companies Act 2015 (No. 17 of 2015), in particular ss. 140 to 148 (the seven general duties), s. 149 (parallel common-law duties), s. 151 (existing-transaction declarations), s. 152 (consequences of failure to declare), ss. 211 to 220 (related-party and substantial property transactions), ss. 238 to 241 (derivative claims and the s. 241 permission criteria). Available via http://kenyalaw.org.
- Companies (General) Regulations 2015.
- Capital Markets Authority Code of Corporate Governance for Issuers of Securities to the Public 2015 (apply-or-explain).
- Central Bank of Kenya Prudential Guideline on Corporate Governance (CBK/PG/02).
- Mwongozo: The Code of Governance for State Corporations. Available via https://www.scac.go.ke.
- Constitution of Kenya 2010, Article 10 and Chapter Six.
- Insolvency Act 2015, provisions on directors’ duties and wrongful trading-equivalent liability.
- For comparative purposes only, and not as authority for Kenyan law: UK Companies Act 2006, ss. 170 to 177.
Disclaimer: This article is general commentary on Kenyan law as at 25 June 2026 and does not constitute legal advice. Specific situations require specific advice. No solicitor-client relationship is created by reading this article. OLM Law Advocates LLP accepts no liability for action taken in reliance on it.
