Directors occupy a central position in the governance of companies, entrusted with the stewardship of corporate assets, formulation of strategy, and adherence to both statutory and fiduciary obligations. In Lesotho, the legislative foundation governing directors’ duties and responsibilities is the Companies Act No. 18 of 2011 (the “Companies Act”). This article offers a doctrinal analysis of the legal regime applicable to directors in Lesotho, elucidating their core duties, the statutory framework within which they operate, and the legal consequences of non-compliance with their obligations.
The Companies Act adopts a functional approach to defining a director, encompassing not only those formally appointed to the board but also individuals who, in practice, exert control or direction over the company’s affairs. This includes shadow directors, persons in accordance with whose instructions the board is accustomed to act. Appointment to the board generally follows a shareholder resolution, and statutory notification must be made to the Registrar of Companies. The Act also imposes disqualification criteria, thereby precluding persons convicted of dishonesty or declared insolvent from acting as directors.
The board typically comprises executive, non-executive, and, in some companies, independent directors. Executive directors participate in the day-to-day running of the company, whereas non-executive directors provide strategic oversight. Independent directors, although not formally defined under the Act, are increasingly recognised as essential for ensuring objectivity in board deliberations, particularly in the context of audit, remuneration, and risk oversight.
Central to the statutory obligations of directors is the duty to act in good faith and in the best interests of the company. Section 80 of the Companies Act outlines these fiduciary obligations, which include the duties of care, skill and diligence, and loyalty. The duty of care requires directors to act with the degree of competence reasonably expected of someone in a comparable position, including an obligation to be properly informed and to make decisions based on adequate information. The duty of loyalty prohibits directors from placing personal interests above those of the company and imposes a strict duty to avoid conflicts of interest, unless properly disclosed and approved by the board.
The Companies Act also establishes a duty to act within the scope of a director’s authority, requiring adherence to both the company’s articles of incorporation and any shareholder or board mandates. Directors must not exceed the powers conferred upon them, and any ultra vires act may render them personally liable for any resultant loss.
Equally significant is the statutory duty to maintain proper corporate records. Directors must ensure that the company maintains accurate minutes of board meetings, up-to-date registers of shareholders and directors, audited financial statements where applicable, and annual returns. Failure to comply with these requirements constitutes an offence and may result in administrative penalties or legal action.
The practical obligations of directors also extend to sector-specific compliance. For example, companies operating in financial services, telecommunications, or insurance are subject to regulatory oversight by institutions such as the Central Bank of Lesotho or the Lesotho Communications Authority. Directors of regulated entities must navigate both the Companies Act and sectoral legislation, ensuring that all statutory reports, license requirements, and governance codes are duly observed.
Non-compliance with statutory duties exposes directors to a range of legal consequences. These include administrative sanctions such as monetary fines, disqualification from holding office, and, in egregious cases involving fraudulent conduct or reckless trading, personal liability for company debts. Sections 83 and 84 of the Companies Act provide for civil and criminal liability for directors who act fraudulently or dishonestly, thereby offering a deterrent against the misuse of directorial authority.
Beyond statutory mandates, corporate governance best practices underscore the importance of internal accountability mechanisms. Directors are advised to establish audit and risk committees, institute policies on conflicts of interest, and engage in regular board evaluations. Good governance is not only a matter of legal compliance but a strategic tool for enhancing investor confidence, improving operational efficiency, and safeguarding against reputational and legal risks.
In sum, the role of directors in Lesotho is both legally regulated and practically complex. The Companies Act provides the principal legal architecture, supplemented by emerging norms of corporate governance aligned with international standards. Directors are required to act not only within the confines of the law but also with ethical discernment and strategic foresight. In doing so, they safeguard the interests of the company and its stakeholders, while contributing to a culture of accountability and sustainability in Lesotho’s corporate sector