What the AIFC rules require of a board, part 1: the duties every director owes

Seventy-three per cent of Kazakh companies surveyed for a report by the Astana International Financial Centre (AIFC), Qazaqstan Investment Corporation and the IFC plan to raise more capital in the next three years, the AIFC said on 13 October. Many will meet the AIFC's own company law on the way: more than 1,400 companies joined the centre in 2025, and the number of investment funds rose from 101 to 159 during the year, according to its annual results. This series reads the texts to set out what they require of a board. Part 1 covers the duties in the AIFC Companies Regulations. Part 2 will cover the corporate governance principles for listed companies, and part 3 the rules for regulated financial firms.

Who is bound

The Companies Regulations took effect on 1 January 2018 and apply within the AIFC's jurisdiction and to anyone conducting business in or from the centre as a participant (section 5). Their directors' chapter applies to a Company, which the regulations define as a private or public company incorporated in, or converted to that form under, the AIFC regime. A foreign company can register as a Recognised Company instead. A Kazakh joint-stock company that lists shares on the Astana International Exchange stays incorporated under Kazakh law; its obligations as a listed issuer come from the AIFC Market Rules, the subject of part 2.

Who may sit, and how they are chosen

A private company needs at least one director and a public company at least two (section 74). A director must be a natural person aged 18 or over, and is barred by a conviction for an offence involving dishonesty or moral turpitude in the past 10 years, a finding of insider trading at any time, disqualification by a court or by the regulator, the AFSA, or an undischarged bankruptcy. Shareholders elect directors by ordinary resolution, one resolution per candidate unless they unanimously agree otherwise, and can remove them the same way. A director appointed by the board to fill a vacancy must be reappointed at the next general meeting or leave (section 75). A public company must have a company secretary whom the directors judge qualified, for example by three years in the role at a public company in the previous five (section 89), and must hold its annual general meeting within six months of the year end (section 94).

The duties and their consequences

Each director owes the company seven duties (sections 76 to 83 and 85): to act within the constitution and use powers only for their purpose; to promote the success of the company for the benefit of its shareholders as a whole, having regard to the long term, employees, suppliers and customers, the community and the environment, the company's reputation and fairness between shareholders; to exercise independent judgement; to use the care, skill and diligence of a reasonably diligent person with both the knowledge expected of the role and the director's own; to avoid conflicts of interest; not to accept benefits from third parties; and to declare an interest in a proposed or existing transaction with the company. The conflict duty continues after a director leaves, for property, information or opportunities learned while in office. The articles cannot weaken any of these duties (section 76).

A breach counts as a contravention of the regulations (section 84). Where a director fails to declare an interest, the company, a shareholder or the Registrar can ask the AIFC Court to set the transaction aside or order the director to account for the gain, unless shareholders ratify it; in a public company the votes of the conflicted director and connected persons are disregarded (sections 85 and 86). A company may not lend to or guarantee for a director unless holders of at least 90 per cent of the shares voted agree and every director certifies the company will not be materially prejudiced (section 87). The Registrar can seek a court order disqualifying an unfit director for up to 15 years for a first offence, and indefinitely for a repeat one (section 92).

What the regulations do not set is a share of independent directors, board committees or a code to report against. For listed companies those come from the seven corporate governance principles in the Market Rules, applied on a comply-or-explain basis, which part 2 of this series will take in turn.