Directors’ Duties and Legal Responsibilities Under Lesotho’s Companies Act 2011
In the modern corporate landscape, company directors are far more than symbolic leaders, they are key decision-makers with legal and ethical duties. In Lesotho, the Companies Act 2011 (as amended) sets out the statutory framework for directors’ conduct, powers, and responsibilities. Compliance with these obligations is critical, not only to avoid legal liability but also to uphold good corporate governance and stakeholder confidence.
Who Qualifies as a Director in Lesotho?
Section 2 of the Companies Act 2011 defines a director broadly to include:
- De jure directors – formally appointed in accordance with the company’s constitution.
- De facto directors – acting in the role without formal appointment.
- Shadow directors – persons whose instructions the board habitually follows, even without holding an official title.
This wide definition ensures that anyone effectively directing the company’s affairs is subject to the same legal responsibilities.
Statutory Duties Under Section 63
Section 63 outlines the core legal duties:
- Good faith and best interests – Directors must act honestly, on reasonable grounds, and in the best interests of the company.
- Care, skill, and diligence – Directors are expected to apply the level of care a reasonable person with similar responsibilities would use, considering the nature of the business and the decision in question.
Failure to comply exposes directors, including former directors, to personal liability for any losses suffered by the company, its shareholders, or other affected parties.
Common Law Fiduciary Duties
Beyond the Act, directors in Lesotho owe fiduciary duties under common law. These include:
- Acting bona fide for the company’s benefit.
- Avoiding conflicts of interest.
- Not exploiting corporate opportunities for personal gain.
- Exercising independent judgment and not fettering voting powers.
- Using powers only for their intended purpose.
The duty of care and skill requires directors to manage the company’s affairs as a prudent person would manage their own.
The no-profit rule prohibits secret profits or transactions creating conflicts of interest. Even if the company does not suffer a loss, such breaches are actionable.
Importantly, these duties can extend beyond a director’s term of office, particularly for senior executives handling confidential information and trade secrets.
Board Oversight and Collective Responsibility
Decisions are made collectively by the board, but individual directors remain accountable for their votes and actions. Directors must:
- Actively challenge proposals they believe harm the company’s interests.
- Avoid passive approval of questionable decisions.
- Understand that “going along” with poor governance can still attract liability.
Mohlomi Corporate Governance Code (Apply or Explain)
Lesotho’s Mohlomi Corporate Governance Code reinforces ethical leadership through the apply or explain principle:
- Boards must apply recommended governance practices or explain why an alternative approach better serves the company’s interests.
- Decisions should promote transparency, integrity, and the company’s stated purpose.
- Ultimately, hindsight and shareholder scrutiny determine whether the chosen approach was justifiable.
Accountability and Legal Consequences
Directors can face significant consequences for breaches, including:
- Civil liability – Compensation to the company for losses caused.
- Criminal liability – For fraud, gross negligence, or wilful misconduct.
- Disqualification – Prohibited from serving as a director for misconduct or insolvency-related offences.
These enforcement measures ensure directors remain vigilant in protecting corporate interests.
Why Director Compliance Matters
Directors’ decisions directly affect the company’s sustainability, its shareholder value, and its reputation in the marketplace. In Lesotho’s regulatory environment, adhering to the Companies Act 2011, embracing corporate governance best practices, and upholding fiduciary duties are essential for:
- Avoiding litigation and penalties.
- Building investor and stakeholder trust.
- Ensuring ethical, transparent, and sustainable business growth.
Lesotho Companies Act 2011: Directors’ Legal Obligations and Governance Responsibilities
| Key Director Duty or Obligation | Relevant Legal / Governance Source |
| Act in good faith and in the best interests of the company | Companies Act 2011, Section 63(1) |
| Exercise reasonable care, skill, and diligence | Companies Act 2011, Section 63(2) |
| Avoid conflicts of interest | Common law fiduciary duties |
| Refrain from making secret profits | Common law fiduciary duties (no-profit rule) |
| Use powers only for their intended purpose | Common law fiduciary duties |
| Comply with the Companies Act 2011 and the company’s MOI | Companies Act 2011, AOI provisions |
| Apply or explain governance practices (Mohlomi Code) | Mohlomi Corporate Governance Code |
| Actively participate in board decision-making | Board governance best practices |
| Challenge decisions that may harm the company | Companies Act 2011 & fiduciary duties |
| Maintain confidentiality of company information | Common law and contractual duties |
| Disclose personal interests in company transactions | Companies Act 2011, Section 75 |
| Refrain from misusing company assets or opportunities | Common law fiduciary duties |
| Ensure accurate and timely financial reporting | Companies Act 2011, financial reporting obligations |
| Monitor company compliance with legal and regulatory requirements | Companies Act 2011 & sector-specific regulations |
| Prepare for and attend board meetings regularly | Board governance best practices |
| Act within delegated authority and board resolutions | Companies Act 2011, delegated authority rules |
| Ensure proper record-keeping of board decisions | Board governance and record-keeping best practices |
| Prevent reckless or insolvent trading | Companies Act 2011, solvency and liquidity requirements |
| Engage professional advice when necessary | Board governance best practices |
| Plan for sustainable, ethical, and transparent company growth | Mohlomi Corporate Governance Code & fiduciary duties |