One of the questions I frequently get from Startup Founders relates to the duties of fellow directors in a private company limited by shares.  This week on The Answers Blog, we explore 3 duties of directors of company and their implications on the operation of the company. Before you burn bridges with your fellow directors, please note the following.

The Companies Act, 2015  (the Act) outlines the general common law and specific duties of a director of a company and corresponding exceptions. One such obligation is the duty to avoid conflict of interest.

Section 146(1) of the Act imposes a duty upon a director to avoid direct or indirect conflicts of interest. This is one of the provisions amended by the Companies Amendment Act, 2017. The amendment lists the specific interests that Section 146(1) may apply to, which include the following: exploitation of any property, confidential information of the company, the director’s position in the company, or opportunities in or for the company regardless of whether the company could take advantage of the same.

Additionally, a director or member is considered as having a personal interest if the director or member or their family member:

• is a party to the transaction or has material financial interest in the transaction; or
• has material financial interest in the transaction that could be expected to affect their judgment adversely to the company.

A director has a duty not to accept benefits from third parties.

According to the Act, the duty not to accept benefits from third parties is infringed if the acceptance of the benefit in question could reasonably be regarded as likely to give rise to a conflict of interest on the part of the director.

Lastly, any director in a company registered in Kenya has a duty to declare interest in any proposed or existing transaction or arrangement by the company. As it is now, the law requires that any director directly or indirectly interested in a proposed transaction i(n which the company is involved) declares the nature and extent of that interest to the other directors or in the case of a public company, to its members within seventy-two (72) hours.

In case you have any further questions about duties of directors in a company, please do not hesitate to email us with feedback at legal@legalconsulting.pro. You may also learn more about available solutions to your business legal struggles here.