Director Responsibilities Under the Kenyan Companies Act: 2026 Compliance Risks

In 2026, directors of Kenyan companies face heightened personal and corporate compliance risks driven by stricter enforcement of the Companies Act 2015, deeper integration between KRA systems (including eTIMS), and increased reliance on statutory audits to uncover governance failures. For boards, founders, and executive directors, ignorance is no longer a defense—director accountability is now digitally traceable, auditable, and enforceable.

This advisory guide explains director responsibilities under the Kenyan Companies Act, the specific compliance risks in 2026, and how boards can protect both the company and themselves.

Who Is Considered a Director Under Kenyan Law?

Quick Advisory:
Under the Companies Act 2015, a director includes de jure directors, shadow directors, and any person exercising control over company decisions. Liability in 2026 extends beyond formally appointed board members.

A director may be:

A formally appointed board member
A managing director or executive director
A shareholder giving binding instructions (shadow director)
A foreign director of a Kenyan-registered entity

Adamjee Advisory Insight (2026):
KRA and the Registrar of Companies increasingly rely on beneficial ownership disclosures and bank mandate reviews to identify de facto directors, even when not listed on CR12 records. Our Company Secretarial Services help ensure board structures are legally defensible.

Core Fiduciary Duties of Directors in 2026

Quick Advisory:
Directors must act in good faith, exercise reasonable care and skill, avoid conflicts of interest, and promote the success of the company. Breaches now carry financial, civil, and criminal exposure.

Key statutory duties include:

Acting within company powers
Promoting the success of the company
Exercising independent judgment
Avoiding conflicts of interest
Declaring interests in transactions
Exercising reasonable care, skill, and diligence

Adamjee Advisory Insight:
In 2026, auditors are required to explicitly assess director conduct and governance controls during statutory audits. Weak oversight is no longer a “management issue”—it is a director-level failure. Learn more in our Statutory Audit Kenya – 10 Step Guide.

Financial Reporting Responsibilities of Directors

Quick Advisory:
Directors are legally responsible for ensuring that financial statements present a true and fair view under IFRS. Delegation to accountants does not remove liability.

Director responsibilities include:

Approving IFRS-compliant financial statements
Ensuring proper accounting records are kept
Confirming consistency between management accounts and statutory filings
Approving audit reports and responding to audit findings

Adamjee Advisory Insight (IFRS + 2026):
With new IFRS disclosure expectations and increased KRA data matching, inconsistencies between financial statements, tax returns, and eTIMS data are now a primary audit trigger. Our Audit and Assurance Services focus on director-level risk mitigation, not just compliance.

Directors and KRA Compliance: Personal Exposure in 2026

Quick Advisory:
Directors may be held personally liable for unpaid taxes arising from negligence, fraud, or willful default. This risk has increased significantly in 2026.

High-risk tax areas for directors:

PAYE and statutory deductions
VAT under-declaration
eTIMS-supported expense validation
Related-party transactions
Withholding tax failures

Adamjee Advisory Insight:
The Finance Act 2025 strengthened KRA’s ability to pierce the corporate veil, especially where directors benefit personally from tax non-compliance. Directors should actively engage in Tax Compliance Advisory rather than relying on junior finance staff.

eTIMS and Expense Approval: A New Director Risk Zone

Quick Advisory:
From 2026, expenses not supported by valid eTIMS invoices are disallowed for tax purposes. Directors approving such expenses risk tax reassessments and penalties.

Director exposure arises when:

Board-approved expenses lack eTIMS documentation
Supplier invoices are non-compliant
Related-party costs bypass eTIMS controls
Capital expenditure is improperly expensed

Adamjee Advisory Insight:
KRA now cross-checks board-approved expenditures against eTIMS datasets. Directors must ensure that internal approval policies align with system controls. Our Bookkeeping Services integrate expense governance into daily operations.

Statutory Audits and Director Accountability

Quick Advisory:
Statutory audits are no longer routine formalities—they are director accountability mechanisms. Audit findings can directly implicate directors.

Auditors must assess:

Governance and internal controls
Related-party transactions
Going concern assumptions
Compliance with the Companies Act
Accuracy of tax provisions

Adamjee Advisory Insight:
Failure to act on prior-year audit recommendations is now a red flag noted in audit reports. Directors should review whether they qualify for exemption under the law using our guide on Audit Exemption in Kenya for Small Companies.

Director Responsibilities in Payroll and Employment Compliance

Quick Advisory:
Directors are responsible for ensuring PAYE, NSSF, NHIF, and statutory deductions are correctly applied and remitted. Payroll failures are a common basis for director penalties.

Common payroll risk areas:

Misclassification of staff as consultants
Late PAYE remittances
Director loan accounts treated as salary
Unapproved benefits and allowances

Adamjee Advisory Insight:
KRA increasingly reviews director remuneration structures during audits. Our Payroll Services ensure director pay is compliant, defensible, and tax-efficient.

Board Governance Failures That Trigger Investigations

Quick Advisory:
Poor governance is now a compliance risk, not just a best-practice issue. KRA and regulators actively pursue governance failures.

High-risk governance gaps include:

No formal board meetings or minutes
Lack of independent oversight
No audit committee (where required)
Undocumented related-party decisions
Inactive or non-existent company secretary

Adamjee Advisory Insight:
Through our Company Secretarial Services, Adamjee Auditors helps boards maintain legally defensible governance structures aligned with the Companies Act and global SFAI standards.

Offshore Operations and Director Oversight

Quick Advisory:
Directors remain fully responsible for offshore accounting, subsidiaries, and shared service arrangements. Distance does not reduce liability.

Risk areas include:

Transfer pricing documentation
Revenue recognition across borders
Management fees and cost allocations
Foreign payroll and withholding taxes

Adamjee Advisory Insight:
As a member of SFAI Global, Adamjee Auditors applies international standards with local enforcement knowledge. Learn more about director-safe structures in our guide on Why Your Business Needs Offshore Accounting.

Director Disqualification and Legal Consequences

Quick Advisory:
Directors may be disqualified, fined, or prosecuted for serious breaches of duty. 2026 enforcement is faster and more data-driven.

Possible consequences include:

Personal tax recovery actions
Director disqualification orders
Criminal prosecution for fraud
Reputational damage
Ineligibility to serve on other boards

Adamjee Advisory Insight:
Proactive compliance reviews reduce enforcement risk. Directors should schedule annual governance and tax health checks, supported by CFO Advisory Services.

How Directors Can Protect Themselves in 2026

Quick Advisory:
Director protection comes from active oversight, documented decisions, and professional advisory support—not passive delegation.

Best-practice actions:

Regularly review management accounts
Demand audit issue resolution
Enforce eTIMS-compliant spending
Document board decisions thoroughly
Engage external auditors and tax advisors
Stay updated through director training

Adamjee Advisory Insight:
Our Training Webinars and Free Webinars are designed specifically for directors, founders, and CFOs navigating 2026 compliance risks.

Final Thoughts: Directors Are the First Line of Compliance

In 2026, director responsibility under the Kenyan Companies Act is no longer theoretical. Regulators now have the tools, data, and legal backing to enforce accountability at board level. Directors who fail to understand their obligations risk personal liability—even where the company survives.

Engaging professional audit, tax, and governance advisors is no longer optional; it is a core board responsibility.

Gain Clarity and Confidence in Your Finances

Navigate the complexities of compliance, tax, and financial management with a trusted partner. Adamjee Auditors, a member of Santa Fe Associates International (SFAI), provides world-class audit, tax, and advisory services to help your business achieve its goals.

Schedule a consultation with our expert team in Nairobi or Mombasa to discuss your business needs.

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