By Dr Solomon Taru Chikanda
Serving on a board is a position of trust, influence, and responsibility. While board membership brings prestige, it also carries significant legal and ethical obligations. Across Africa and globally, regulators, investors, and the public are becoming increasingly vigilant about how boards conduct themselves. As a result, director liability and delinquency have become critical issues every board member must fully understand.
Whether you are a seasoned director or newly appointed, your effectiveness, and your protection, depends on knowing the scope of your duties, the behaviours that create risk, and the actions that can prevent liability.
1. What Is Board Liability?
Board liability refers to the legal accountability that directors assume when they accept a board appointment. Directors may be held personally liable when they fail to exercise their duties properly, causing harm to the organisation, its stakeholders, or the public.
Liability falls into several categories:
a) Fiduciary Liability
Directors must act in good faith, in the best interests of the company, and avoid conflicts of interest. A breach, such as self-dealing, misuse of position, or favouritism, may result in personal liability.
b) Legal & Regulatory Liability
Boards are responsible for ensuring compliance with national laws, regulations, and industry codes. Non-compliance (e.g., tax violations, labour breaches, unlicensed operations) can expose directors to sanctions, fines, and prosecution.
c) Financial Liability
Directors may be liable if they approve financial statements that are misleading, fraudulent, or materially inaccurate, or if they fail to prevent financial mismanagement.
d) Operational & Governance Liability
Poor oversight, failure to monitor risks, or lack of due diligence can expose directors to claims of negligence.
Bottom line:
Accepting a board seat means accepting legal accountability.
2. Understanding Director Delinquency
Director delinquency refers to behaviour or actions that demonstrate serious misconduct, negligence, dishonesty, or incompetence in the performance of board duties.
A delinquent director is one who:
- Fails to act in good faith
- Abuses power or authority
- Engages in corruption or unethical conduct
- Wilfully fails to perform oversight
- Ignores legal obligations or governance standards
- Participates in reckless trading or decision-making
- Misuses company funds or confidential information
In some jurisdictions, a declared delinquent director may be:
- Barred from serving on boards (sometimes permanently)
- Personally liable for damages incurred
- Criminally prosecuted for certain offences
- Publicly listed as delinquent, damaging reputation
3. Key Duties Every Director Must Honour
To avoid delinquency and liability, directors must demonstrate:
(i) Duty of Care
Act with the diligence, skill, and competence expected of a director in your position.
(ii) Duty of Good Faith
Place the organisation’s interests before personal interests.
(iii) Duty of Loyalty
Avoid conflicts of interest and disclose them when they arise.
(iv) Duty of Compliance
Ensure the organisation adheres to laws, codes, and internal governance frameworks.
(v) Duty of Oversight
Monitor management, risk, financial reporting, and organisational performance.
(vi) Duty of Accountability
Be answerable for decisions, actions, and omissions.
Boards cannot hide behind “I didn’t know”—directors must proactively ensure they do know.
4. Red Flags That Expose Directors to Liability
Directors become vulnerable when they:
- Sign documents they have not read or understood
- Approve financial statements without due scrutiny
- Allow management to dominate or manipulate the board
- Ignore whistleblower reports or early signs of risk
- Fail to declare conflicts of interest
- Miss meetings or attend unprepared
- Stay silent when unethical behaviour is taking place
- Permit reckless spending or unsound investments
- Fail to insist on compliance and risk controls
- Allow the board to operate without proper committees
These behaviours plant the seeds of delinquency.
5. How Directors Can Protect Themselves
1. Stay Informed & Prepared
Read board packs thoroughly; ask questions; demand clarifications.
2. Maintain Independence of Mind
Do not simply rubber-stamp management’s views.
3. Insist on Proper Governance Systems
Focus on risk controls, compliance, and internal audit structures.
4. Declare and Manage Conflicts of Interest
Transparency is protection.
5. Document Everything
Ensure your dissenting views or concerns are recorded in minutes.
6. Continuous Learning
Laws, codes, and governance expectations evolve—directors must upskill continuously.
7. Use Professional Advice When Needed
Legal, financial, or technical advice is sometimes necessary—and prudent.
8. Demand Ethical Behaviour
Culture starts with the board. If leadership is compromised, the organisation is compromised.
6. The Consequences of Delinquency
Director delinquency can lead to:
- Personal financial liability
- Loss of reputation and credibility
- Civil or criminal charges
- Ban from future board appointments
- Damage to organisational stability and investor confidence
No role is worth your integrity, reputation, or freedom.
7. The African Governance Landscape Is Changing
Regulators across Africa are tightening laws around corporate governance, accounting standards, corruption, ESG reporting, and director misconduct. Investors are also more demanding, expecting boards to demonstrate professionalism, ethical leadership, and accountability.
This means future directors will face greater scrutiny, and higher expectations, than ever before.
Conclusion
Board service is not ceremonial. Directors carry profound responsibilities that require competence, integrity, courage, and vigilance. Understanding liability and avoiding delinquency is not merely a legal requirement, it is the foundation of ethical, high-impact leadership.
A director who leads ethically protects:
- the organisation
- stakeholders
- the economy
- and themselves.
Good governance is not an option. It is an obligation.
Dr. Solomon Taru Chikanda is a specialist in Corporate Governance, Strategy, Leadership Development, and Wellness. With vast boardroom and executive experience, he leads Vineyard Funeral Assurance as Managing Director and serves as Lead Consultant at Inspire World Institute, where he champions strong governance, and organizational excellence.
📞 0772 721 962 | ✉️ stchikanda@inspireworld.co.zw
