Staff Writer 
Bothwell P. Nyajeka
LAST week, I had the privilege of presenting at the Institute of Chartered Accountants of Zimbabwe (ICAZ) Winter School in Victoria Falls. Beyond the sessions, one of the highlights was reconnecting with old friends and engaging with a new generation of energetic, and talented professionals.
One question kept resurfacing during conversations over tea breaks and after the sessions: “Can directors say no to a powerful shareholder who appointed them to the board and has the power to remove them?”
My answer was a straight “yes”. Directors have the power to say no and in some circumstances, they have a legal duty to do so. This is what Zimbabwe company law says.
This answer often surprises people because it appears counterintuitive. After all, shareholders own the company, and they are the ones who appoint the directors. Surely directors should simply do what shareholders want?
One of the most fundamental principles of company law is that a company is a separate legal person, distinct from its shareholders. This distinction has deep implications for directors. A director’s fiduciary duty is owed to the company itself, not to the shareholder who nominated or elected them, or who has the power to remove them. Directors are therefore required to exercise independent judgement and act in what they honestly believe to be the best interests of the company as a whole.
This is the legal foundation upon which a board can legitimately refuse a shareholder’s request or instruction. Directors are not delegates sent to advance the interests of a particular shareholder. They are fiduciaries entrusted with protecting the interests of the company.
Modern corporate governance has also moved beyond a narrow focus on shareholders alone. The Companies and Other Business Entities Act [Chapter 24:31] requires directors, in carrying out their duties, to have regard to the impact of the company’s operations on the community and the environment.
Accordingly, a board may legitimately refuse a proposal that exposes the company to unacceptable legal, financial, reputational or environmental risks, even where a powerful shareholder supports it.
Another misconception is that shareholders are legally obliged to act in the best interests of the company as a whole. They are not. A shareholder’s vote is generally a personal proprietary right that may lawfully be exercised in pursuit of that shareholder’s own interests.
The board’s role is not to act as an instrument through which shareholders pursue private interests. Rather, it exists to provide independent judgement and ensure that decisions promote the long-term interests and sustainability of the company.
Where shareholder interests diverge from the interests of the company, directors must stand on the side of the company. This does not mean shareholders are entirely powerless; the law explicitly reserves several critical decisions for their approval. These include adopting annual financial statements, declaring dividends, appointing and removing directors and external auditors, authorising major corporate transactions, initiating voluntary liquidations, and amending the Memorandum and Articles of Association. Outside these reserved boundaries, however, operational and strategic authority rests strictly with the board.
The distinction between shareholder wishes and directors’ duties is reinforced by personal liability. Directors who breach their fiduciary duties or permit reckless trading may face personal liability. In such circumstances, the defence that “the shareholder instructed us to do it” provides little protection.
The law expects directors to exercise independent judgement. If they fail to do so, responsibility rests with them, not with the shareholder who exerted pressure.
In practice, however, saying “no” to a shareholder is rarely straightforward. Many directors understand their legal obligations but hesitate to oppose influential shareholders. They worry about damaging relationships, creating conflict or even losing their positions. These concerns are understandable, particularly in closely held companies or family-controlled businesses. The real challenge, therefore, is not whether to say no, but how to say no without creating an unnecessary governance crisis.
Boards can disagree with shareholders while preserving constructive relationships and maintaining confidence in the governance process.
First, disagreements should remain within the governance structures of the company. Sensitive issues should be resolved through board meetings and constructive shareholder engagement, not through press statements or corridor politics. Public disputes rarely benefit the company and often destroy shareholder value.
Second, the board should carefully document the reasons for its decision. Board minutes should clearly record the fiduciary, legal, governance or procedural concerns underpinning the board’s position. The discussion should focus on principles rather than personalities. A well-documented decision provides important evidence that directors acted independently, in good faith and in the best interests of the company.
Third, when significant issues arise, particularly regarding related-party transactions, acquisitions or other major corporate actions, the board should obtain independent legal, financial or valuation advice before acting on a shareholder request. Such counsel strengthens both the quality and credibility of the board’s decision.
Fourth, where the chairperson or a majority of the board is conflicted, the response to the shareholder should be led by an independent non-executive director or, where appropriate, an independent external board advisor. This helps preserve the integrity of the decision-making process and demonstrates that conflicts of interest have been managed appropriately.
Finally, communication should be transparent and equitable. Where appropriate, the board should communicate with shareholders collectively rather than engaging selectively with the shareholder whose proposal has been rejected. This reduces perceptions of unfair prejudice and reinforces confidence in the board’s independence.
Boards should also recognise that governance disputes are no longer purely internal matters. In recent years, regulators have demonstrated an increasing willingness to intervene where governance failures threaten investor confidence and market integrity. In Zimbabwe, both the Securities and Exchange Commission of Zimbabwe (SECZ) and the Zimbabwe Stock Exchange (ZSE) have shown a greater readiness to exercise their regulatory powers where governance disputes undermine confidence in the market, including, where circumstances warrant, the suspension of trading in listed securities while governance concerns are addressed.
This should remind directors that governance disputes can have consequences far beyond the boardroom. They can affect investor confidence, access to capital, corporate reputation and shareholder value. Accordingly, boards should seek to resolve disagreements professionally, transparently and in strict accordance with the law, always guided by their fiduciary duty to the company.
Ultimately, saying “no” to a shareholder should never be driven by personalities, politics or power struggles. It must be grounded in fiduciary duty, supported by sound governance, informed by independent advice when necessary, and guided by the long-term interests of the company.
l Nyajeka is a business consultant and board advisor. He has vast experience as a corporate executive and has sat on various boards in Zimbabwe, Botswana, South Africa and Uganda. He is currently chairman of ACR Solutions and is also a seasoned trainer and facilitator for the Institute of Directors Zimbabwe (IoDZ). For business consulting, board advisory and executive coaching services Email him on: bnyajeka@acr4solutions.com
