Directorship in Tanzania carries duties that are easy to sign up to and easy to overlook until something goes wrong. The Companies Act codifies obligations that expose directors personally, and enforcement - through the company, its members or the registrar - is a live risk, not a theoretical one. A periodic reminder of what the role actually requires is worth the time.
Where the Duties Come From
The Companies Act, Cap. 212 is the source, supplemented by a company’s own articles and, at the margins, by principles the courts have long applied to those who manage other people’s money. The duties attach to the office, not to the title on a business card: anyone who in fact directs the company’s affairs may be treated as a director and held to the same standard, which catches shadow and de facto directors who assume they are insulated because they were never formally appointed.
The Duty of Care and Skill
A director must exercise reasonable care, skill and diligence. The standard is both objective and subjective: the care expected of a reasonably diligent person in the role, raised by any special knowledge or experience the particular director actually has. A qualified accountant on a board cannot plead ignorance of the accounts to the standard a lay director might; a director who brings expertise is held to it. Passivity - not reading the papers, not attending, not questioning - is where the duty is most often breached.
Fiduciary Duties and Conflicts
The fiduciary duties are the heart of the role: to act in good faith in the interests of the company, for proper purposes, and without allowing personal interest to conflict with duty. The conflict rules bite hardest in practice. A director who has an interest in a transaction the company is entering must disclose it, and the articles and the Act govern whether and how that director may participate or vote. Undisclosed self-dealing is the classic breach, and the remedy can strip the director of any gain.
Consequences and Enforcement
Breach exposes a director to personal liability to compensate the company, to account for improper gains, and in serious cases to disqualification from acting as a director. The company itself usually brings the claim, but members can pursue a derivative action where the company will not act because the wrongdoers control it, and the registrar has its own oversight and enforcement role. The protection of limited liability shields shareholders from the company’s debts; it does not shield a director from the consequences of breaching duty.
Practical Discipline
Good governance is mostly unglamorous habit: attend and prepare for meetings, ensure decisions and the reasons for them are minuted, declare interests early and in writing, keep the statutory registers and file the annual returns with the registrar on time, and take advice before entering transactions where duty and interest might meet. Directors who treat the role as an honorific carry the same liability as those who treat it as a job - only with a thinner record to defend themselves.
For general information only - this material does not constitute legal advice.
Eric Frank Ringo is a Principal Partner at FIN & LAW, an Advocate and Arbitrator in Tanzania. Eric has over 20 years’ post-qualification practice focusing on tax, corporate,…
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