Building a Board That Works: Composition, Committees and Independence in the Kenyan Company

In brief

• The Companies Act sets only a floor: one director for a private company, two for a public one, and at least one natural person on every board. Everything above the floor is a design choice, and the design decides whether the board governs the company or merely attends it.
• For listed and regulated companies, the design is prescribed. The CMA code, Mwongozo and the sector regulators require independence, committee structures and evaluation, and they read compliance as part of the licence.
• For the private company, the family group and the funded startup, the case for a real board is practical. A board is what lenders, investors, regulators and buyers examine, and building one early costs far less than assembling one under demand.

Most Kenyan boards were never designed. They were assembled from the founders, a relative with a profession and whoever was present at incorporation, and many now govern companies far larger than the original arrangement ever contemplated. The law tolerates this for a long time, because the Companies Act asks very little of a private company’s board. Then, at some point the company crosses without noticing, the tolerance ends. An investor demands a board seat and an audit committee, a bank asks who the independent directors are, a regulator’s fit and proper forms arrive, or a buyer’s due diligence asks for five years of minutes that do not exist. This article is about designing the board before someone else demands it, and it applies to the private company as much as the listed one.

The statutory floor

A private company needs one director, a public company needs two, and every company must have at least one director who is a natural person. The law is therefore satisfied by arrangements no serious business should settle for, because the floor exists to make incorporation easy rather than to make governance good. What the Act does insist on everywhere is that whoever sits on the board carries the full duties discussed in the first article of this series. That produces an irony worth noticing: the smaller and more casual the board, the more concentrated the personal exposure of the few people on it.

What the codes require of listed and regulated companies

Once a company issues securities to the public or holds a financial licence, board design stops being a matter of private taste. The Capital Markets Authority’s code for issuers expects a board with a majority of non-executive directors and at least a third independent, a chairperson separate from the chief executive, an audit committee of non-executives chaired by an independent director, nomination and remuneration arrangements that can be explained, annual evaluation of the board and its committees, and diversity treated as a question of composition rather than of photographs. State corporations answer to Mwongozo, which speaks the same language with a public-sector accent. Banks, insurers and fund managers meet equivalent expectations from their own regulators, enforced through the fit and proper machinery that vets every director on the way in. Two features of this regime are regularly underestimated. The codes work on an apply-or-explain basis and the explanations are public, so a weak board is visible to anyone who reads the annual report. And a regulator that loses confidence in a company’s governance usually expresses that loss of confidence through its directors.

What independence really means

An independent director is not a stranger, a figurehead or a retired dignitary collecting sitting allowances. Independence means the absence of relationships that would compromise judgment: recent employment with the company or its group, material business dealings, family ties to management, a significant shareholding, or simply long tenure, which erodes independence as surely as kinship does. The independent seat exists for specific work, the related-party transaction scrutinised by someone with no stake in it, the audit committee able to disagree with the finance director, the valuation challenged by a director with no side to protect. There is a Kenyan habit worth naming here. Boards fill independent seats with friends of the founder on the theory that friendship is not an interest, and then discover, at the worst possible moment, that the friend cannot tell the founder no. When choosing an independent director, the ability to refuse matters more than the biography.

Committees and what they are for

Committees are how a board spends its attention where attention is owed. The audit committee is the spine of the structure. It owns the integrity of the financial statements, the relationship with the external auditor, and the internal controls that tend to fail quietly for years before they fail loudly. Risk, nomination and remuneration committees follow as the company’s size and the codes require. Two rules keep committees honest. Each needs a charter stating what has been delegated and what returns to the full board for decision, because a committee without one is either toothless or a shadow board. And each needs minutes of its own, because a committee that reports orally has, for legal purposes, barely met. For a private company, one well-built audit and risk committee is usually the first investment worth making, and it is the one lenders ask about.

Designing the board of a private company

For a company below the codes, the design question is one of proportion. A board of three to five members with one genuinely outside voice changes more than its size suggests, because it forces the habits that protect everyone: papers prepared, meetings held, decisions minuted, conflicts declared. The skills should be staggered deliberately. The business already knows itself, so the outside seats should carry what it lacks, whether that is finance, the industry’s regulation or the market it is entering. The division of authority should be written down as a schedule of matters reserved to the board against what management decides alone, since most conflict between founders and boards is at bottom a boundary dispute. Evaluation belongs in the calendar once a year, even where it amounts to one honest structured conversation. And the paperwork should be real, for the reason this series keeps returning to: the board’s record is the company’s memory, and in every transaction, licence application and dispute, that memory is examined. Where a board would rather have the examination done privately before anyone else does it, a governance audit is the instrument, and our page on what one involves is linked below.

What happens next

Next this series turns from the board to the general meeting, where the shareholders exercise the powers the board does not hold and where Kenyan companies make their most frequent procedural mistakes, beginning with the twenty-one days of notice the law requires. A well-built board and a well-called meeting are the two halves of the same machine.

Frequently asked questions

How many directors must a Kenyan company have?

A private company needs at least one and a public company at least two, with at least one natural person on every board. That is the legal floor, and serious companies build above it for the reasons this article sets out.

Must a private company have independent directors?

No statute requires it, but lenders, investors and buyers increasingly do, and one credible outside voice is among the highest-return governance investments a growing private company can make.

Can the same person be chairperson and chief executive?

In a private company, lawfully yes. In listed and regulated companies the roles are expected to be separate, and even in private companies the combination concentrates power the board is supposed to check, which is why investors negotiate it away.

What does an audit committee actually do?

It owns the integrity of the financial statements, the relationship with the external auditor and the internal controls, with members drawn from the non-executives and a chair who is independent. It is the committee lenders and regulators ask about first.

How often should a board be evaluated?

Annually is the standard the codes set, with an externally facilitated evaluation at intervals. For private companies the discipline matters more than the formality, and one honest structured review a year changes behaviour.

Peter Maina is a Partner of Peter Maina & Company Advocates. This article states the law as at 20 October 2026. It is general information, not legal advice. To design or review a board, its committees and its charters, reach out on e-mail peter@pmlaw.co.ke or WhatsApp +254 714 644 080.