Board Roles, Responsibilities and Legal Duties
What the exam tests
This domain tests whether you can separate the board's direction-and-oversight role from management's execution role, and whether you can apply directors' statutory duties to a messy fact pattern rather than simply recite them.
The board's core responsibilities
- Set strategy, approve budgets and risk appetite, and appoint, monitor and, if necessary, remove the CEO.
- Oversee performance and compliance without taking over operations.
- Account to shareholders and, increasingly, to employees, regulators and host communities.
- Ensure the company has a company secretary; CAMA 2020 requires every company to have one, and a public company's secretary must hold a recognised professional qualification (ICSAN, ICAN, ANAN or law).
Legal duties under CAMA 2020 and the NCCG 2018
Directors owe their duties to the company, not to individual shareholders. The settled content is: act in utmost good faith in the company's best interests; exercise powers for a proper purpose and within the constitution; exercise the care, diligence and skill of a reasonably diligent person with that director's knowledge and experience; avoid conflicts and disclose any interest in a transaction; do not make secret profits; do not fetter the board's discretion. Breach can attract personal liability, disqualification and avoidance of the transaction.
Worked example
A non-executive director learns that the CEO's private company will supply logistics to the group. He says nothing because the price looks fair. Analysed properly: the fairness of the price is irrelevant to the duty to disclose; the director has breached the conflict rules and the board's decision is exposed to challenge. The correct route is a written declaration, exclusion from the vote and from the quorum on that item, an independent pricing benchmark, and a minuted decision.
Traps
- Assuming non-executive directors carry lighter duties - they do not.
- Treating 'the board approved it' as a defence where disclosure was suppressed.
- Confusing legal compliance with ethical governance.
- Letting the CEO set the board's agenda by default.