ew directors of Kenyan companies could not recite the seven statutory duties on demand. Fewer still could tell you, without checking, what the High Court did with those duties in the last six matters it heard. The duties have not changed. The standard the courts are applying to them, quietly, and consistently, has.
This is a practical briefing for boards that have not refreshed their charter, their conflicts register, or their director-induction pack since the Companies Act 2015 was first bedded down. It does not aim to be a treatise. It aims to flag the three or four places where the gap between what boards do and what the courts now expect has grown widest.
Where boards are quietly drifting
Section 142 sets out the duty to promote the success of the company. The word 'success' is doing more work than most boards realise. The courts are reading it as a duty to consider, and minute, a defined set of factors before a major decision is taken. 'We discussed it' is no longer minute enough.
- The likely long-term consequences of the decision.
- The interests of employees, suppliers, and the community where the company operates.
- The desirability of maintaining a reputation for high standards of business conduct.
- The need to act fairly as between members.
Where minutes are silent on these factors, the courts have been willing to draw inferences against the board, not because the decision itself was wrong, but because the record will not support the defence the board now needs.
“A board that cannot show how it considered the section 142 factors is a board that has weakened its own defence, long before the dispute arrives.”
Conflicts: the standing one, not the obvious one
Most boards manage transactional conflicts well, the director who owns the supplier, the partner with the side interest. The conflicts that produce the litigation are the standing ones: a director with a longstanding personal relationship, an undisclosed shareholding through a nominee, a family member on the counterparty's board. These are the conflicts the Act asks directors to disclose, and the ones most rarely committed to the register.
Reasonable care, skill, and diligence
Section 144's hybrid standard, the objective standard of a reasonably diligent person, raised by the director's actual knowledge and experience, is the source of most director-level risk. A CFO who sits on the board is held to the standard of a CFO, not of a lay director. The corollary is the one boards underuse: the lay director is entitled to rely on the professionals around the table, provided the reliance is reasonable and the issue was visible to the board.
Reasonable reliance is documented reliance. The board pack should show what the executive said, what the auditor said, what the lawyers said. The minute should show the board read it. The defence to a future claim is built, or not built, in those two documents.
Three changes worth making this quarter
- Add a section 142 prompt to every board pack, five short lines for the chair to fill before the meeting, capturing the long-term and stakeholder considerations.
- Move the conflicts refresh from joining-the-board to a fixed annual cycle, and minute the affirmation.
- Standardise the board pack so the basis for reliance is visible on the face of the paper, not buried in an attachment.
None of these is a structural change. Each closes a gap the firm now sees with regularity, and the cost of closing them is a fraction of the cost of defending the position they would otherwise have left exposed.