The question that where to use the definition of interested director arises while reading section 174 and 184. Interestingly the term “interested director” is used only once in entire Companies Act and that is section 174(3) but further explanation of that sub-section provides that for the purpose of sub-section(3) interested director means a director within the meaning of section 184(2). Now there is a confusion regarding application of the definition of “interested director”.Given below are the provision from where the above conclusion is formed.
Section 174 talks about Quorum for the Board Meeting :
section 173(3) provides that if the number of interested director exceeds or is equal to two-third of the total strength of BOD then at least two disinterested director will qualify as quorum. Further explanation is provided that the term interested director means the one provided in section 184(2).
Section 184 talks about disclosure of interest of director.
Sec 184(2) states that every director who is whether directly or indirectly,concerned or interested in a contract or arrangement (in past) or proposed contract or arrangement entered into or to be entered (in future) into –
a) with a body corporate in which such director whether singly or jointly with other director holds more than 2 % of paid up share capital of that body corporate or is a promoter,manager,chief executive officer of that body corporate,(It may be noted that the director who holds up to 2% or is mere director of that other body corporate is not required to give disclosure in sub-section 2)
b)with a firm or other entity(sole proprietary ship firm) in which such director is a partner ,owner or member as the case may,
shall disclose the nature of his concern or interest at the board meeting in which the contract or arrangement is discussed and shall not participate in such meeting.It means he shall not be counted in quorum for that item and shall not have voting rights.
(Author can be reached at [email protected])
