Governance Advisory & MWONGOZO Audits in Nairobi | CS Advocates

The Companies Act 2015 codifies the main duties: to act within the constitution and exercise powers for a proper purpose, to promote the success of the company, to exercise independent judgement, to exercise reasonable care, skill and diligence, to avoid conflicts of interest, not to accept benefits from third parties, and to declare an interest in a proposed transaction. These are duties owed to the company, and they apply to a de facto director as well as a formally appointed one. See shareholding structures and director duties.

The starting point is limited liability, so a director is not personally liable for the company’s debts simply by being a director. Personal exposure arises in specific circumstances: wrongful trading, breach of duty, personal guarantees, fraudulent or reckless conduct, unpaid statutory liabilities where the law imposes personal responsibility, and disqualification proceedings. In practice the personal guarantee in a facility agreement is what most often brings a director’s own assets into play. See company documents and insolvency.

The interest should be declared as soon as the director becomes aware of it, recorded in the minutes, and the director should not vote or be counted in the quorum on that matter unless the constitution permits otherwise. For a proposed transaction with the company, the Companies Act requires disclosure to the board. The value of the process is the record: a conflict handled properly and minuted is defensible, while one handled informally and left out of the minutes is not, even if the outcome was fair. See recording board decisions and conflicts.

MWONGOZO applies to state corporations and public entities, and its requirements vary with the category of entity, so the first step is determining which set of provisions applies to you. Compliance is assessed against prescribed governance instruments, board composition and practice, records and reporting. Entities sometimes assume the code does not reach them, or work from an outdated version, and both create avoidable audit findings. We confirm the applicable version and requirements against your specific entity before advising. See MWONGOZO governance audits.

The Companies Act requires registers of members, directors and secretaries, and records of charges, along with proper accounting records and minutes of board and general meetings. Minutes should record attendance, quorum, the papers considered, interests declared and how they were handled, the resolutions passed, and actions with owners and deadlines. Beyond the statutory minimum, the practical test is whether the record would let a reader reconstruct why a decision was taken. See how to record a board decision and annual returns compliance.